Suppose a State Law Is Passed Which Prohibits the State

question 14

Multiple Choice

Suppose a state law is passed which prohibits the state liquor board from issuing any new liquor licenses. (Such licenses are required to sell liquor.) The law would allow prospective tavern operators to purchase an existing license on the open market from a willing current owner of such a license.Which outcome would you expect to result from this regulation?

• A)A decrease in economic rent to current holders of liquor licenses
• B)An increase in economic rent to current holders of liquor licenses
• C)An increase in economic rent to prospective operators of taverns
• D)No change in economic rent to prospective operators of taverns

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