Which of the Following Statements Regarding the Requirement That a Firm

question 5

Multiple Choice

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.

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Definitions:

Budget Constraint

The limitations on the consumption choices of an individual or household due to limited financial resources.

MUx/MUy

Represents the marginal utility of good x divided by the marginal utility of good y, often used in consumer choice theory to analyze optimal consumption points.

Indifference Curve Analysis

A graphical representation of consumer preferences showing combinations of goods or services among which they are indifferent, demonstrating varying levels of utility.

Indifference Curves

Graphical representations of different bundles of goods between which a consumer is indifferent, portraying preferences.