Suppose That It Requires a Special License in Order to Operate

question 133

Multiple Choice

Suppose that it requires a special license in order to operate a firm in a certain type of industry.In addition,suppose that firms that hold such licenses are able to sell them for a high price.Which of the following statements is true?

• A)The firms in this industry must all be franchised.
• B)This is a typical monopolistically competitive market in which there are no economic profits in the long run.
• C)The government that issued the original licenses will be willing to issue more.
• D)There is free entry by new firms into this industry.
• E)Most firms currently in the industry are earning economic profits.

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Definitions:

Average Rate of Return

An investment's return, expressed as a percentage, which is calculated by dividing the average annual profit by the initial investment cost.

Cash Payback Method

An analysis technique to determine the time needed to recoup the initial investment in a project, based on cash flows.

Advantage

A favorable or beneficial condition, circumstance, or position that contributes to success.

Proposal

A formal offer or plan put forward for consideration or discussion by others.