On the Marginal Cost of Wastewater Services

The purpose of this paper is to analyze the marginal cost of municipal wastewater services. The authors begin by describing the nature of wastewater services. This is of importance since the measurement of marginal cost is an activity that requires a specialized knowledge of the engineering and technology of the industry (Turvey 1969). In the next section, the relevant definition and interpretation of marginal cost is dealt with. The definition is then applied to the measurement of marginal cost for a hypothetical, but realistic, wastewater system. In the last section, observations are made about the design of wastewater tariffs.