The Maxwell School
Syracuse University
Syracuse University
The goal of many public sector organizations is to serve as many clients as possible without running a deficit. Rather than maximizing profits, in other words, their objective is to maximize output subject to the constraint that profits not be negative. To accomplish that, the organization should choose the level of output, Q, at which average revenue is equal to average cost (AR=AC). That will generally be larger than the Q chosen by a profit-maximizing organization.