Which of the following statements regarding the requirement that a firm be granted a license to operate in a particular market is false?
A)Advocates of licensing maintain that the practice is necessary to maintain quality of service.
B)One of the economic effects of a license requirement is to constrain the available supply of the affected good or service.
C)The requirement that they be licensed ensures that the affected firms will be able to earn a positive economic profit.
D)Relaxing certain licensing requirements should increase the supply of the affected good or service.

Question

Quizplus · Accepted Answer

The requirement that firms be licensed does not necessarily ensure that they will be able to earn a positive economic profit. Licensing may create barriers to entry, limiting competition and allowing licensed firms to charge higher prices for their goods or services, but this does not guarantee that they will make a profit.

Which of the Following Statements Regarding the Requirement That a Firm