The dictator of a certain country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones. Other things the same, in the long run this requirement would
A)reduce real GDP per person and productivity.
B)reduce real GDP per person but not productivity.
C)reduce productivity but not real GDP per person.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Requiring a large fee to file the application for opening or expanding companies would increase the cost of doing business, which would reduce investment and ultimately reduce productivity and real GDP per capita. Companies may delay or abandon their plans to expand or open new factories, leading to a reduction in output and employment opportunities. Thus, in the long run, the requirement would negatively impact the economic growth and development of the country.

The Dictator of a Certain Country Requires That Companies Planning