The subjective value of the consumers' good, as we have seen, is determined by its anticipated usefulness to the purposes of the consumer—in this case, Crusoe. The subjective value of each factor is determined by its anticipated usefulness in the production of that consumers’ good. Consequently, subjective value is often simply called utility.

In order for Crusoe to engage in the productive activity we have described, the anticipated utility of the tree house must exceed the utility that its factors of production might have had in any alternative uses, as determined by his personal purposes. In fact, since Crusoe always acts to maximize his purposes (cf. p. 4.4:1), the utility that he gains at each stage of production must exceed the utility that he forgoes by expending valuable factors at that stage. This latter utility is known as the cost of that stage of production.