• To plan properly, managers need to be able to predict the impact of new government regulations on their firms’ costs, their sales, and their probability of surviving. Managers complain constantly about the costs and red tape that government regulations impose on them. The highly competitive U.S. trucking industry has a particular law. In recent years, federal and state fees have increased substantially and truckers have had to adhere to many new regulations.The Federal Motor Carrier Safety Administration (FMCSA), along with state transportation agencies in 41 states, administers interstate trucking licenses through the Unified Carrier Registration Agreement. According to FMCSA’s website in 2018, it has 40 different areas of regulation, each of which contains multiple specific items, including regulations on noise, drivers, hazardous materials, preserving records, and transporting migrant workers. A trucker must also maintain minimum insurance coverage, pay registration fees, and follow policies that differ across states before the FMCSA will grant permission to operate. The registration process is so complex and time consuming that firms pay substantial amounts to brokers who expedite the application process and take care of state licensing requirements. For a large truck, the annual federal interstate registration fee can exceed $8,000. To operate, truckers and firms must pay for many additional fees and costly regulations. These largely lump-sum costs which are not related to the number of miles driven—have increased substantially in recent years. In 2017, regulations took effect requiring each truck to have an electronic onboard recorder, which documents travel time and distance, with an annualized cost of several hundred dollars per truck. What effect do these new fixed costs have on the trucking industry’s market price and quantity? Are individual firms providing more or fewer trucking services? Does the number of firms in the market rise or fall?