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

Question

Quizplus · Accepted Answer

Universities want to maximize their profits while still ensuring that their classrooms are filled. Financial aid allows them to attract students who might otherwise not be able to afford to attend the university. As long as these students on financial aid are paying some amount that is still greater than the marginal cost of attending classes, the university gains positive marginal profit.

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