Figure 5-1
In Figure 5-1, S₁ and D illustrate the demand and supply for a product if it were produced in a normal competitive market . Which of the following would be true if the firms in the industry were instead able to get government licensing restrictions to limit competition in the market?

Question

Figure 5-1

In Figure 5-1, S₁ and D illustrate the demand and supply for a product if it were produced in a normal competitive market . Which of the following would be true if the firms in the industry were instead able to get government licensing restrictions to limit competition in the market?

Quizplus · Accepted Answer

If firms in the market were able to limit competition through government licensing restrictions, the supply curve would shift to the left from S₁ to S₂, resulting in a higher price and less than efficient level of output. This is because with less competition, producers have less incentive to lower their prices to attract customers and produce at the efficient level.

Figure 5-1 in Figure 5-1, S1 and D Illustrate the Demand and the Demand

Figure 5-1 in Figure 5-1, S₁ and D Illustrate the Demand and the Demand