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<p>Even non-profit or government run organizations need to consider such things like average cost versus marginal cost (and any money that comes in is “revenue”) when calculating whether they will break even or better (note that those non-profit schools which ran profits / surpluses over the years have built up big endowments).</p>
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<p>Those faculty (particularly tenured) and facilities costs are largely fixed, so that they have to be paid for regardless of whether the campus is full or not full. They go into average cost per student, but not marginal cost of additional students if the campus is below capacity (of course, marginal cost increases greatly after capacity is reached and additional capacity must be added to accommodate the next student).</p>
<p>Suppose a campus is sized (facilities, staff, utilities, etc.) for 20,000 students. If it has 19,000 students, then some of its capacity is wasted. The marginal cost of teaching each of another 1,000 students is much less than the average cost per student at the school, because the average costs includes the fixed costs of the capacity that exists and has to be paid for regardless of the number of students. If the tuition paid by the 1,000 students (discounted for in-state subsidy and financial aid grants) is higher than the marginal cost of the 1,000 students, then the campus does better financially.</p>
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<p>True, but with it open, it is better to use it to its capacity rather than have pay its fixed costs while having it underused. Well, other than closing or mothballing it.</p>
<p>Also, as described above, spring admissions is a way of using unused capacity that would otherwise go to waste.</p>