Question

Suppose you are enrolled in Oceanside University (OU). Tuition fees for the year are 2000+(1000 x the number of credits you take per year). This is your only option if you attend University.

a) [9 points] Assume for this part that we are in a pre-COVID-19 world and all classes are face-to-face etc. Suppose quantity is the number of credits per year that you can take. Assume also that credits can only purchased in integer amounts. Create a small, clearly labeled table that captures your Marginal Willingness to Pay (MWTP) for every credit, no equations. Explain carefully how you calculate these numbers. Does your MWTP increase or decrease with the number of credits taken? Why? Note: the actual numbers don't matter as much as your explanation about how you would determine these numbers.

b) [8 points] Now COVID-19 hits. You, your family, and everyone in your city are all healthy, thankfully, but all classes move online. Tuition fees stay the same. How does your Does your MWTP in part (a) change? Does your decision to attend University change when classes move online?. Why or why not? Explain your reasoning.

Answer 1

a) Suppose that to graduate I need minimum 30 credits in a year. Then for upto 30 credits a year my MWTP for every credit is at least 1000 which is the marginal cost of every credit, considering that I took admission because I want a graduate degree. Also upto 30 credits my MWTP for every credit is constant because they all contribute equally to my main motive of earning a degree and are necessities in this sense. After 30 credits, I don’t necessarily have to enroll in a course so my MWTP declines with every credit as I am less inclined to spend more time and money on more studies.

Credits (quantity)	MWTP
1	1200
2	1200
3	1200
…	…
29	1200
30	1200
31	1100
32	1000
33	500
34	200
35	100
36	0

b) When Covid-19 hit, several people were layed off and the prospect of my getting a job after graduation in a recession does not seem likely. I am worried that my investment in education will not payoff. So my MWTP for each credit decreases when classes go online. It may be the case that I may not attend University if my MWTP for upto 30 credits becomes less than 1000, in which case I would not get my degree.