Government licensing is a process where the government grants businesses or individuals official permission to operate in a specific industry. This acts as a barrier to entry, meaning only those who meet official requirements can legally provide certain goods or services.

Key points:

• Its primary goal is to ensure quality, safety, and professional standards.
• Common examples include licenses for doctors, taxi drivers, and businesses that handle food.
• Applicants must pass tests or meet specific criteria before receiving their license.
• It can help manage market power by ensuring that service providers are capable and regulated.

While licensing protects the public from unqualified providers, it can also restrict competition. This may lead to higher prices because the total number of businesses allowed to operate is limited.