Most (but not all) universities are 'not-for-profit' firms. What is it that such firms are maximizing? How do non-profits choose quantity and price? We know that profit maximization leads to a situation where MC=MR for the last unit produced; this implies that the value of the resources needed to produce the good are equal to the extra amount that consumers are willing to pay for the good. This has important implications for economic efficiency and non-profits are thus less likely to be efficient producers. Why is production less efficient?

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