If Smith decides to increases production, then his costs include the interest he could have earned on the $10, $30, $20, $5, and $25 at the market interest rate of 10% per year. (Cost, we remember, is determined by the alternative ends that the means might otherwise have served; cf. pp. 4.4:13-4.) The interest that each factor would have earned must be compounded across that factor's period of production. (A factor's period of production, we remember, is the time separating it from the final consumers' good; cf. pp. 4.4:11 ff.)

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