Application of economic prinicples - Case Scenarios

Provide a short answer (2-3 paragraphs) to each of the situations and questions described below. The assignment is designed to assess how you think about and apply the concepts introduced by the readings and presentations. Please provide your reasoning and include explicit mention of the concepts and readings (including citations) from Lesson 3.

Please submit your finished work to the Lesson 3 Assignment Drop Box.

Situation 1.

You work within a regional public university that recently received a pledge from a prominent alumna that could fund the creation of a new ornithology center. The donation would cover the initial start-up costs of the center and, in combination with center revenues, would cover 70% of the recurring costs of the program. Should decision-makers accept this gift? Should there be any conditions for accepting the gift?

Situation 2.

You work at a small private institution that is contemplating expanding enrollment. Last year, the average cost of educating a student at your institution was $15,000 and the average net tuition revenue was $13,000. Should the institution expand enrollment for financial reasons? How would your answer change if your institution is residential and currently has no space in its dormitories? How would your answer change if your institution caters to commuting students and is not facing limitations on classroom space? How would your answer change if the institutional grant aid required to attract additional students is much higher than the aid currently being offered?

Situation 3.

You work at an urban community college that recently opened an instructional program that neither advanced nor detracted from its mission. The program was controversial due to the need for initial investment during a difficult financial year, but supporters were able to start the program by promising that the institution would make money in its first five years. In its first year, the program generated no revenue but spent $500,000 developing the curriculum and marketing it. In years two through five, the program cost $200,000 per year to operate and generated $300,000 per year in revenues through contracts with local employers. Detractors of the program note that the initial promises were not met and are calling for the program to be eliminated so resources can be focused on core programs. Are the detractors correct? Explain the reasoning behind your response.

Situation 4.

You work at a public institution that is contemplating starting a hockey team and having them play in an existing local arena. The president is only willing to start the team if the hockey team can be funded in a manner that does not detract from the future economic situation of the institution. A prominent hockey supporter proposes a plan: A fundraising appeal to 200 of the institution’s wealthiest alumni that could lead to donations that would cover the initial start-up costs and produce an endowment that would cover the recurring costs that are not covered by program revenue. Does this plan meet the criteria stated by the president? Explain the reasoning behind your response

Situation 5.

You are at a large public university where tuition has been increasing at a rate of 7-10 percent a year for the past five years. The Governor of the State has cut the budget for higher education by 20 percent during the past 3 years. He is now proposing shifting most aid from direct appropriations to having the same amount of funds available to students in the form of financial aid. He is concerned that the unemployment or underemployment rate of recent college graduates is very high (over 50 percent) and that students are relying on loans and graduating with great debt. The President of your institution has asked you to present the best possible argument for maintaining the current direct appropriation to your institution and increasing state support by 10 percent this year, with no tuition increase. How would you respond? Does your view of the economics of higher education support the Governor’s position – or the President’s position? What data would you use to support your position?