The main distinguishing structural or demographic feature of rural environment which alters the nature of the economics of educational service provision is sparsity of population. The paper first examines the effect of population on the unit cost of provision of educational services in rural areas at the primary school level. Second, rural school consolidation is examined from a cost-efficiency perspective. School size and cost are addressed in an "a priori" framework which sees schooling as a labor-intensive industry with a limited cost saving potential from a successful exploitation scale of economies. Of four research studies on economies of size in primary schools, three are reported to have found evidence of economies of size. "The Economics of Rural School Consolidation" reviews Western Australia's consolidation efforts in the 1950s and 1960s. It is stressed that even at the technical/economic level, let alone at the political/educational level, an understanding of local circumstance is paramount. (AH)