Close-end matching grants, Cost Accounting

RC School District has a large number of students in need of remedial instruction.  The superintendent of RC School System can allocated her budget between purchasing X units of remedial instruction at a price of $2,000 / unit and spending an amount ($Y) on all other school activities.  (For the purposes of this problem, assume that “all other school activities” can be viewed as a composite commodity with a per-unit price of $1,000.)  The Superintendent has a budget of $800,000, raised through local taxes, to allocate between the two activities.

The State Legislature is considering ways to induce RC County to purchase more units of remedial education for underachieving students.  It is specifically considering various forms of grants.

1. Budget Constraints

a. Draw and label Superintendent’s budget line with no State aid (Make sure to put units of remedial instruction on the horizontal axis)

b. Assume the Superintendent chooses to purchase 100 units of remedial instruction and 600 of “other school activities.  Label this is allocation as point “K” on your diagram

2. Open-Ended Matching Grants

a. One option for the State is an open-ended matching grant, under which the state would match RC School District one-for-one every dollar the District spends on remedial instruction.  Draw and label the superintendent’s new budget constraint under this program (you should draw this new budget line on the same graph you produced in #1 above)

3. Close-End Matching Grants

a. A legislator, fearing school districts will respond so aggressively to the subsidy for remedial instruction provided by the matching grant that it will be too costly, proposes that the matching grant program be closed-ended, such that no district can receive more than $100,000 of state aid.  Draw and label the Superintendent’s budget constraint under this closed-end matching grant program (You should draw a new budget line, using the same chart from #1 and #2 above)

b. As a legislator interested in increasing remedial education services, do you think making the matching grant closed ended will lead RC County to provide fewer units of remedial education than if the matching grant were open ended?  Explain.  (Hint, think about income and substitution effects).

Posted Date: 2/27/2013 2:59:28 AM | Location : United States







Related Discussions:- Close-end matching grants, Assignment Help, Ask Question on Close-end matching grants, Get Answer, Expert's Help, Close-end matching grants Discussions

Write discussion on Close-end matching grants
Your posts are moderated
Related Questions
A retailer knows the annual demand for one of its product is 100,000 units, the ordering costs are £25 per order and the average carrying cost per unit is 35 pence. You are require

The Smiths have a long-term capital loss carryover of $10,000 from 2010. On May 9, 2007, David's uncle, Joe, gave him the family antique gun collection. Based on family records

The costs that are fixed irrespective of manufacture are fixed costs. EX: Rent, Depreciation. Fix cost is those cost who not alter in any time whether the production done or not

a.    If you could pick a single source of cash for your business, what would it be? Why? b.    How can a business earn large profits but have a small balance in Retained Earnin

Chen Enterprises purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company''s only product.

Semi Fixed Costs Are costs along with both a variable and fixed cost component? The fixed component is such portion that is constant irrespective of the level of activity. The


1) The Svelte Jeans Company produces two different types of jeans. One is called the "Simple Life" and the other is called the "Fancy Life". The company sales budget estimates that

One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store manager must determine when to replenish it

Martinez Corporation engaged in the following cash transactions during 2012. Sale of land and building $186,710 Purchase of treasury stock 42,130 Purchase of land 39,130