Cost Recovery: An Investment Perspective
A point frequently made and one that was raised during the 1979 Seminar on transport cost recovery, is that financial cost recovery and economic efficiency are uneasy bed fellows. The reason for this is that economic efficiency requires prices to be set equal to the costs of the marginal unit consumed. However, such an equality will result in an accounting loss if the industry in question is a decreasing cost industry (because of economies of scale) or an industry which is operating at less than full capacity because of technical indivisibilities in the production process (see Annex).
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