During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?
A)Students go to college even when the net benefit is negative.
B)The opportunity cost of attending college is lower when unemployment is high.
C)The opportunity cost of attending college is higher when unemployment is high.
D)The benefit of attending college is lower because college graduates are less likely to find jobs.

Question

Quizplus · Accepted Answer

Applying the Incentive Principle, if we observe more people going to college, then it is likely because either the benefit of going to college has gone up, or the cost of going to college has gone down. An increase in the unemployment rate lowers the opportunity cost of going to college because individuals who otherwise might have preferred to work, will be less able to find jobs.

During Times of High Unemployment, Colleges Often Observe an Increase