Marginal costs In an educational systeminstitution this is the additional

Marginal costs in an educational systeminstitution

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Marginal costs: In an educational system/institution, this is the additional expenditure as a result of expanding enrolment. It shows how much a new student would cost an education system/institution if an extra student was to be enrolled. Economies of scale: Refers to a decrease in per unit cost as a result of an increase in output. Diseconomies of scale: Refers to an increase in per unit cost as a result of an increase in output. Diseconomies of scale usually, but not always, start occurring as firms get large. There are two reasons:
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[email protected] 23 1. As the size of the firm increases, monitoring costs generally increase; 2. As the size of the firm increases, team spirit or morale generally decreases. Monitoring costs : Those costs incurred by the organizers of production in seeing to it that employees do what they are supposed to do Cost Function Analysis entails computation and comparison of Average costs and Marginal costs of an institution. Comparison of MC and AC shows the levels of efficiency in an institution as whether or not the Marginal Costs equals the Average Costs depends on the degree of utilization of resources within the institution. (Insert Graph) Comparison of relationship between MC and AC yields 3 possible scenarios with different efficiency implications. a) MC less than AC be less than AC in such situation; an extra student ent will lower unit/average cost. Therefore, it is possible to expand enrolment without incurring corresponding substructure increases in expenditure efficiency exists from an internal perspective
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[email protected] 24 b) MC equal AC -or-overutilization new student olicy option is to maintain this enrolment level c) MC greater than AC economies of scale; -utilised/overstretched/strained leading to inefficiency; Summary: As enrolment in a school goes up, the unit cost goes down (economies of scale) which is a reflection of efficiency. However, there reaches a time when further increase in enrolment does not lead to a decrease in unit cost but the the Unit cost remains constant for sometime. This is referred to as constant return to scale and it is an indicator that efficiency is running out. Then, a
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[email protected] 25 further increase in enrolment leads to an increase in AC/Unit cost. This is referred to as diseconomies of scale and it shows the resources are being used inefficiently. Obstacles to Educational Efficiency 1. Wastage: Drop out and repetition. These could be due to; a) economic difficulties, and, b) Low quality of education 2. Teacher salaries: Consume about 90% of education budget. However, if teachers are well paid, the system enjoys both internal and external efficiency and vice-versa. Ways of boosting efficiency 1. Revise school calendar-avoid long holidays 2. Utilize new technologies, e.g. e-learning, 3. Make education an economic undertaking, i.e. commercialize/privatize education 4. Equity in educational finance and distribution at all levels 5. Locate educational institutions appropriately EQUITY IN EDUCATION
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