The local government is worried that profits in the industry may lead to high levels of production of alcoholic beverages if the government issues additional licenses, but it also does not want existing firms to earn large profits from limited entry. The government thus decides to increase the cost of a license. If the government wants to keep the price and production at current levels while also ensuring no excess profits for current producers, how much should it charge for a license?

Answer rating: 100% (QA)

To prevent excess profits for current producers and maintain the price and p... View the full answer