When Universities Announce a Large Tuition Increase and Follow It

question 261

Multiple Choice

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

• A)have elastic demand and students who use financial aid have inelastic demand.
• B)have inelastic demand and students who use financial aid have elastic demand.
• C)view a college education as an inferior good and students who use financial aid view it as a normal good.
• D)view a college education as a normal good and students who use financial aid view it as an inferior good.

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Definitions:

Predetermined Overhead Rate

A calculated rate used in cost accounting to allocate overhead costs to products or services, based on estimated overhead costs and activity levels.

Direct Labour Hours

The total hours worked by employees who are directly involved in the production process of a company.

Underapplied Overhead

Occurs when the allocated manufacturing overhead costs are less than the actual overhead costs incurred.

Direct Labour Cost

The total cost of all the labor force that is directly involved in the manufacturing of a product or the provision of a service.