Why Is Student Financial Aid a Profit-Maximizing Decision for Universities

question 23

Multiple Choice

Why is student financial aid a profit-maximizing decision for universities?

• A) because universities only give financial aid to a very small number of students
• B) because as long as the students on financial aid pay some amount that is still greater than the marginal cost of attending the classes, the university still gains positive marginal profit
• C) because the university is able to charge no more than a dollar over the marginal cost of attending classes
• D) because the university gains goodwill by providing financial aid

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Definitions:

Monopolist

A single seller in a market who has significant market power and can influence the price and quantity of goods or services.

AC

Average Cost; the total cost of production divided by the quantity produced, indicating the cost per unit of output.

Monopoly

An economic situation where a sole seller dominates the market by providing a product that has no closely comparable substitutes.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price level and period.