Illustrate what increase in consumer prices will occur

Assignment Help Business Economics

Reference no: EM1364248

2. In some industries producers have to buy "quota rights" in order to legally sell output. For example, taxi drivers in some cities need to have a medallion: the number of such medallions is limited but they are bought and sold on an open market. In January 2010 the average price of NYC taxi medallions was $583,000. For purposes of this question we will assume that a seller needs one "unit" of quota rights to sell one unit of output in a given period.

b) Consider what happens when a previously unregulated industry has a quota system imposed. Assume the total units of quota available equal 90% of the pre-regulation quantity (x0) Suppose the elasticities of supply and demand are 0.333 and !0.667, respectively. What increase in consumer prices will occur (as a fraction of the pre-regulation price p0)? What will be the value
of a unit of quota rights (as a fraction of the pre-regulation price p0)?

c) Suppose a unit of quota rights allows the producer to sell a unit of output each year indefinitely into the future. How does your answer to part b) change?

Reference no: EM1364248

Questions Cloud

Recording the issuance of common and preferred stock : Kathleen Battle Company was organized on January 1, 2003. It is authorized to issue 10,000 shares of 8 percent, $100 par value preferred stock, and 500,000 shares of no par common stock

How to calculate the horizontal distance the ball : how to Calculate the horizontal distance the ball would travel if the same spring were aimed 32 deg from the horizontal.

Prior hisory of immunizations : A nurse is reinforing teaching with a client who reports no prior hisory of immunizations. Which of the following statements requires further teaching?

Buffet requirement to be capital efficient : The best investor of all time, Warren Buffet, talks about investing in "capital efficient" businesses. Coca Cola falls into this category since it generates great sums of cash with minimal investment in capital.

Illustrate what increase in consumer prices will occur : Suppose a unit of quota rights allows the producer to sell a unit of output each year indefinitely into the future. Illustrate what increase in consumer prices will occur.

Write a shell script to read from the keyboard : Write a shell script called poject. 21 to read from the keyboard and display on the monitor first name, last name and age if the age is less than 50. If the age is greater than 50, it will display your are over 5 instead of the age.

Compute the expected return on stock : Assume the expected return on the market portfolio is 13.8% and the risk-free rate is 6.4%. Solomon Inc. stock has a beta of 1.2.

Bringing drugs to the market : What are the benefits to bringing drugs to the market? What are the costs to bring a drug to the market?

Compute canonical cover for set of functional dependencies : Compute a canonical cover for the above set of functional dependencies (show each step of your derivation with an explanation).

User Account

All Pages