Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

A) It increases by $1000.
B) It decreases by $1000.
C) It decreases by less than $1000.
D) It stays the same.

Business License

A legal authorization granted by a governmental body allowing individuals or companies to operate a business within a specific jurisdiction.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Profit

The financial gain achieved when the revenue from a business activity exceeds the expenses, costs, and taxes associated with maintaining the activity.