Answer to Question #97379 in Microeconomics for keke

Question

Whether or not FIT should run a class. (All numbers made up.) Relevant information & assumptions are: For each student FIT receives $300 in tuition per class & another $300 in state aid, $600 altogether. We are considering whether to let a night class in Labor Economics run. Assuming using an adjunct (part-time) instructor paid $2,000 to teach the class. Assuming that if the class doesn't run, we'll lose all the students, that they'll go to another college to take the class or will just do something else with their time. Also, that this class doesn't have an effect on whether or not they take other classes at FIT. In order for a class to cover all of the fixed (the Dean's and President's salaries & the building & insurance that you will have to pay whether or not you run the class) & variable costs (the instructor who you will have to pay if you run the class & won't have to pay if you don't) it needs to generate $9,000 & enrollment of 15 students. 10 students sign up for the class.

Answer 1

The class should not be dismissed

Each and every student receives $300 in tuition per class and additional $300 in state aid. This adds up to $600 altogether. With this, you run the class with 10 students since it earns some over the variable cost. This would help up in covering the fixed cost. When students enroll, the FIT earns $6000 in total. The variable cost of a hiring an instructor is $2000. That means the FIT remains with $4000 that can be used to cover part of the fixed cost.