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

question 31

Multiple Choice

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

• A) Universities only give financial aid to a very small number of students.
• B) 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) The university is able to charge no more than a dollar over the marginal cost of attending classes.
• D) The university gains goodwill by providing financial aid.

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Definitions:

Equipment

Tangible items purchased for use in the production or supply of goods and services, not intended for sale as part of regular operations.

Depreciated

The reduction in the value of an asset over time, often due to wear and tear or obsolescence.

Tax Purposes

Refers to the reasons or motivations behind actions taken or strategies employed to minimize tax liability or comply with tax laws.

Tax-shield Approach

A method to reduce taxable income through allowable deductions such as interest expenses, resulting in lower taxes.