Note on the Optimal Size of Government
Since government is a nonprofit organization, I apply firm
theory under zero profit condition to analyze the optimal size
of government. Government should minimize shortrun
average cost while demand for public service is equal to
supply of public service. The optimal size of government
implies (1) tax is minimized under balance budget given
public service and (2) budget surplus and budget deficit are
inefficient (i.e., balance budget is Pareto optimum)
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