What is the deadweight loss of this policy

Assignment Help Macroeconomics

Reference no: EM13181961

Taxis: In many cities around the world the taxi-cab industry is heavily regulated. Analyze the three different regimes of regulation (a, b and c). Make the follow- ing assumptions: the supply of taxi-rides is upwards sloping and the demand is downward sloping.

(a) Free markets: Show graphically what would be the market equilibrium if there would be perfect competition in taxi industry. Identify the consumer surplus and producer surplus.

(b) Production quota: In many cities, the amount of licenses to operate taxis is limited. For the purposes of this problem, we can think this is a production limit (a maximum production level) of taxi rides set by government. Assume that this limit is lower than the free market quantity of taxi-rides. What would be the prevailing market price and quantity [Hint: the price is read from the demand curve]? Show what happens to consumer surplus and producer surplus. What is the deadweight loss of this policy?

(c) Production quota and maximum price: Suppose that the policy in part b is added to include a regulated price (so the government sets the price of taxi- rides). This is the actual policy of many cities. Assume 1) that this price is such that the suppliers will still supply exactly the production limit and 2) it is lower than the price in part b). What happens to producer and consumer surplus compared to part b)? What happens to deadweight loss compared to b?

Reference no: EM13181961

Questions Cloud

Compute the mole fraction of oxygen : A mixture of gases conssists of CH4 at a partial pressure of 143 mm Hg, N2 at a partial pressure of 469 mm Hg, and O2 at a partial pressure of 563 mm Hg

State labeling the acid and base : Write the equation for this reaction, labeling the acid, base, conjugate acid, and conjugate base

Calculate total consumers surplus using individual demand : Assume there are two types of consumers: type A consumers have a demand Q = 10 ? P for widgets, and consumers of type B have a demand Q = 5 ? P. Assume that there are 10 consumers of each type. (a) Calculate the market demand.

State the oxidation of sodium metal to sodium oxide : Consider the oxidation of sodium metal to sodium oxide described by the balanced equation

What is the deadweight loss of this policy : Production quota: In many cities, the amount of licenses to operate taxis is limited. For the purposes of this problem, we can think this is a production limit (a maximum production level) of taxi rides set by government. Assume that this limit is lo..

State butanone and hydroxylamine under acid catalyzed : Write out the mechanism for the oxime formed from 2-butanone and hydroxylamine under acid catalyzed conditions.

Determine the number of carbon atoms in the compound : The mass spectrum of an organic compound shows the relative abundances of M to be 58.09% and M 1 to be 15.08%. Assuming the peaks are caused by 12C and 13C isotopes, determine the number of carbon atoms in the compound

State synthesizing acetyl ferrocene from acetic anhydride : the lab was synthesizing acetyl ferrocene from acetic anhydride and ferrocene then doing column chromatography on it if you wanted to modify the experimental procedure to synthesize diacetylferrocene, what changes might you consider?

User Account

All Pages