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Government Bureaus and Private Firms

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How do government bureaus differ from private firms? Why is there good reason to believe that bureaucrats will seek to supply more than the efficient level of their output in any year? Why will the losses in efficiency result if a government bureau succeeds in maximizing its annual expenditures?

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Solution Summary

This Solution explains why efficiency differs between government bureaus and private firms.

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Private firms seek to maximize their profits. This means that they must keep expenses down so that their revenue is sufficient to generate a profit. A governmental agency has no such motivation. In fact, it is well ...

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