There are many possible ways to limit the number of cabs in a city. The most common method is an explicit quota using a medallion that is kept forever and can be resold. One alternative is to charge a high license fee each year, which is equivalent to the city’s issuing a medallion or license that lasts only a year. A third option is to charge a daily tax on taxicabs. Using figures, compare and contrast the equilibrium under each of these approaches. Discuss who wins and who loses from each plan, considering consumers, drivers, the city, and (if relevant) medallion owners.
There are many possible ways to limit the number of cabs in a city. The most common method is an explicit quota using a medallion that is kept forever and can be resold. One alternative is to charge a high license fee each year, which is equivalent to the city’s issuing a medallion or license that lasts only a year. A third option is to charge a daily tax on taxicabs. Using figures, compare and contrast the equilibrium under each of these approaches. Discuss who wins and who loses from each plan, considering consumers, drivers, the city, and (if relevant) medallion owners.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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There are many possible ways to limit the number of cabs in a city. The most common method is an explicit quota using a medallion that is kept forever and can be resold. One alternative is to charge a high license fee each year, which is equivalent to the city’s issuing a medallion or license that lasts only a year. A third option is to charge a daily tax on taxicabs. Using figures, compare and contrast the equilibrium under each of these approaches. Discuss who wins and who loses from each plan, considering consumers, drivers, the city, and (if relevant) medallion owners.
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