As the trustees of valuable public resources, public-sector managers must administer economic resources in a responsible manner. This task is made difficult by problems involved with assessing the true level of public demand for government-provided or government-administered goods and services. Avariety of nonmarket-based mechanisms have evolved that can be used to effectively administer government programs and investment expenditures. The most prevalent of these methods compares relative costs and benefits.
If investment in a public project makes at least one individual better off and no one worse off
When all Pareto satisfactory programs and investment projects have been undertaken potential Pareto improvement
When an anticipated program or project involves positive net benefits marginal social costs
Added private and public expenses marginal external costs
Expenses that are not directly borne by producers or their customers
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