Scenario: According to New York Department of State, Division of Licensing Services, "The practice of 'cosmetology' means providing service to the hair, head, face, neck, or scalp of a human being, including but not limited to shaving, trimming, and cutting the hair or beard either by hand or mechanical appliances and the application of antiseptics, powders, oils, clays, lotions or applying tonics to the hair, head, or scalp, and in addition includes providing, for a fee or any consideration or exchange, whether direct or indirect, services for the application of dyes, reactive chemicals, or other preparations to alter the color or to straighten, curl, or alter the structure of the hair of a human being." You must acquire a license to be a beautician to offer any of the services described above in New York State, as in many other states. Many aspiring beauticians enroll in accredited cosmetology schools to complete a 1,000-hour approved course of study and to pass both the New York State written and practical examinations to get a license to operate.
-Refer to the scenario above.Which condition of a perfectly competitive market could most directly be hampered by the licensing requirement?

Question

Quizplus · Accepted Answer

The requirement of a license to be a beautician creates a barrier to entry in the market, as individuals must complete a 1,000-hour approved course of study and pass both the New York State written and practical examinations to get a license. This limits the number of potential sellers who can enter the market, which directly hampers the condition of free entry and exit from the market in a perfectly competitive market. Therefore, choice C is the best answer.