ABSTRACT
The public and private enterprises alike buy the inputs which make up their marginal costs at prices which we take to represent the marginal social costs of each input. Much of the discussion of optimal pricing by public enterprises which is to be found in the literature is couched in terms of general equilibrium analysis. We are concerned to derive rules for the behaviour of one, or a group of public enterprises which will maximize the Social Benefit of their activities less their Social Costs, given the environment within which they work, so the rules can only cover things under their control. The cost assumption is really that we have no good reason for supposing the price of any important input to diverge markedly in any particular direction from its marginal social cost and that we cannot even take the trouble to think about the question for the unimportant inputs.
