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RECENTLY Mr. R. H. Coase has stated his objections against basing prices on marginal costs, and has argued for what he calls "multi-part" pricing.' The issue has to do mainly with decreasingcost industries, and the multi-part procedure apparently amounts to price discrimination.2 He assumes all costs attributable to individuals responsible for them, all costs incurred currently, and all factors in perfectly elastic supply. The example he uses is the following: the consumers live in a ring around a central market. A carrier takes goods to them from the market. The carrier can take additional packages without any difficulty, within limits sufficiently wide. The income distribution is assumed optimum. Marginal-cost pricing is identified with charging the consumers only the central market price, the marginal cost of carrier-services being zero.3 Multi-part pricing is identified with charging one price for the goods at the central market and another price for the whole services of the carrier.4 In this setting, Mr. Coase makes the following charges against marginal-cost pricing

TH:E following note is the result of a study by the Engineering Experiment Station of Iowa State College. It represents an attempt to find the form of the functional relation between cost and output in an electric light and power plant. A broader knowledge of such relations should be useful in discussions of light-plant economics. For instance, the extent to which the rate schedule should encourage consumption increases depends partly on the shape of the cost curves.