A Final Note
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The proof of the fundamental theorems of my paper was on the basis of a set of assumptions including one to the effect that prices in the absence of the excise taxes were equal to marginal costs. It follows quite readily from these theorems that the attainment of the maximum of the general welfare, in the only sense that can apparently be given to this expression with the help only of rank ordering of a person’s satisfactions without interpersonal comparisons, requires that all sales be at such prices that the quantities bought will be exactly the same as if these sales were at marginal cost. In particular, in considering what prices should be charged by state-owned or regulated enterprises, we have marginal cost as the criterion, leaving no place for the criteria generally used, such as average cost.
KeywordsMarginal Cost Average Cost Interpersonal Comparison Public Revenue Toll Charge
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