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Efficient Economic Production
Anderson: Government Production and Pricing of Public Goods
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Production of Public Goods and Services
• First, consider the case where the government actually produces a public good or service.
• An example is that of public schools where education is produced.
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Recycling Capital Intensive
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Recycling Labor Intensive
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Figure 8.1: Product Curves for Production of a Public Good
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Figure 8.2: Schooling Production Isoquants
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Figure 8.3: Production with Inputs That Are Perfect Complements
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Wassily Leontief
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USSR Input-Output Tables
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Figure 8.4: Fixed Ratio Production Technology
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UC Berkeley – Wheeler Hall
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George Dantzig
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Jerzy Neyman
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Figure 8.5: Schooling Isocost Lines
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Figure 8.6: Optimal Input Combination
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Aircraft Scheduling
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School Bus Schedule
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Garbage Collection Schedule
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Constrained Optimization Using Excel
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Decision Trees
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Monte Carlo Simulation
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Returns to Scale
• What is the effect of a proportional scaling of all inputs used in production?• Increasing returns to scale• Decreasing returns to scale• Constant returns to scale
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Example: Education Production• Table 1 provides Hanushek’s findings based on
analysis of 147 studies of education production functions in the literature.
• E.G., consider the teacher-pupil ratio, which we would expect to be positively related to student performance.
• Table lists effects of other inputs as well.
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