Question

8. Harvard, Yale, and Princeton all charge relatively high tuition. Still, each uses ACT and SAT scores as admission criteria. Are charging relatively high tuition and using standardized test scores as admission criteria inconsistent? Explain your answer.

Answer 1

ANSWER:

8.

Despite the relatively high tuition, there are more students who wish to attend these schools than seats available. The schools could raise the money price until the number who wish to attend equals exactly the available space. However, schools generally have more than one goal. They also wish to maximize the quality of their students. Thus, it makes sense that they would use a second, nonprice rationing technique that allows them to deal with the surplus of applicants and meet their second goal of having an intelligent student body. It may be in their interest to have a persistent surplus to ensure that their enrollment goals are always met. Then the ACT and SAT scores become a necessary rationing device to select students. Either way, using both prices and the test scores allow them to meet more than one goal at the same time.

38.

To conclude we can say that the GDP measures all expenditure in the country regardless of source. So it measures all spending, U.S. and foreign, on U.S. goods. We see that explicitly in the calculation with the inclusion of net exports.