Problems for Week 4

Problems for Week 4 - no medallion required? b. What are...

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Problems for the material in Chapter 4 3.10 To drive a taxi legally in New York City, you must have a medallion issued by the city government. City officials have issued only 13,200 medallions. Let’s assume that puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day because no one breaks the law by driving a taxi without a medallion. Let’s also assume that each taxi can provide 6 trips per day. In that case, the supply of taxi rides is fixed at 79,200. We show this in the following graph, with a vertical line at this quantity. Assume that there are no governmental controls on the prices that drivers can charge for rides. a. What would the equilibrium price and quantity be in this market if there were
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Unformatted text preview: no medallion required? b. What are the price and quantity with the medallion requirement? c. Indicate on the graph the areas representing consumer surplus and producer surplus if there were no medallion requirement. d. Indicate on the graph the areas representing consumer surplus, producer surplus and deadweight loss with the medallion requirement. 3.20 According to an article in the Economist, because of rent controls in the Indian city of Mumbai, landlords have left an estimated 40,000 properties vacant. Explain why rent controls might result in landlords leaving properties vacant. Film clip In extraordinary times rent controls are the only possible solution to shortages. Do you agree or not? Explain....
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Problems for Week 4 - no medallion required? b. What are...

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