Question
Construction contractors in some states must be licensed by the state. An annual fee often accompanies the license application and the fee must be paid
Construction contractors in some states must be licensed by the state. An annual fee often accompanies the license application and the fee must be paid before the license (and therefore permission to work) is granted. If construction contracting is a competitive market, draw a firm-level graph and a market graph (two separate graphs) showing the impact of an increase in the work license fee. Based on the graph, explain briefly in words how the license fee increase influences the number of firms operating in the market, the market price, and the output of the market. Be sure to mention the long run impact on contracting firm profits. [Hint: a fee can be modeled and analyzed like a tax]
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