Small size is often cited by reformers and parents as the key ingredient necessary to create an effective learning environment. In New York City, the new public secondary schools have consistently smaller numbers of students than most existing high schools. The literature is unambiguous that smaller schools show better outputs than schools of other sizes, but is less clear about the relationship of school size and costs. This report analyzes the relationship between size of student body and school costs and performance in New York City public high schools, using Board of Education school-level data (1995-96) on budgeted expenditures, student characteristics, and performance. Of 201 secondary schools and programs in the Board's database, 133 were included in the analysis; excluded entries did not serve all grades 9-12, served very specialized populations, or lacked information on necessary variables. The schools were categorized as small (less than 600 students), smaller medium (600-1,200), larger medium (1,200-2,000), and large (over 2,000). Results indicate that the size of the student body was an important factor in relation to costs and outputs. Although small academic schools had somewhat higher costs per student, their much higher graduation rates and lower dropout rates produced among the lowest cost per graduate in the New York City system. Contains 36 references, 8 data tables and figures, and a glossary. (Author/SV)