Question: The federal government wants to support education but must not
The federal government wants to support education but must not support religion. To this end, it gives the University of Notre Dame $2 million with the stipulation that this money be used for secular purposes only. The accompanying graph shows Notre Dame’s pre-federal-gift budget constraint and best attainable indifference curve over secular and non-secular expenditures. How would the university’s welfare differ if the gift came without the secular- userestriction?
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