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Chapter 4: Q1. (page 190)

How did lenders benefit from the restriction on the number of New York City taxi medallions?

Short Answer

Expert verified

The lenders benefited from the restriction on the number of New York City taxi medallions as it reduced the number of loan defaults.

Step by step solution

01

Explanation

The lender will benefit only if the borrower repays the loan amount. The increasing number of Uber reduced each taxi driver's revenue share. The monthly taxi pickup dropped to 12 million from 14 million in just two years. As a result, when the revenue earned from a taxi fell, it became difficult for a taxi driver who borrowed money from the lender to repay the loan amount.

Hence, the lenders benefited by restricting the number of taxi medallions.

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Most popular questions from this chapter

Question: Explain how each of the following illustrates one of the three principles of economy-wide interactions.

  1. The White House urged Congress to pass a package of temporary spending increases and tax cuts in early 2009, a time when employment was plunging and unemployment soaring.
  2. With oil prices plummeting, Canadian and U.S. oil companies have been forced to shut down their productive wells. In cities throughout North Dakota, Wyoming, Taxes, and Alaska, restaurants and other consumer businesses are failing.
  3. In the mid-2000s, Spain, which was experiencing a big housing boom, also had the highest inflation rate in Europe.

Suppose that the supply and demand for taxi rides is given by Figure 4-7 but the quota is set at 6 million rides instead of 8 million. Find the following and indicate them on Figure 4-7.

  1. The price of a ride
  2. The quota rent
  3. Suppose the quota limit on taxi rides is increased to 9 million. What happens to the quota rent?

Assume that the quota limit is 8 million rides. Suppose demand decreases due to a decline in tourism. What is the smallest parallel leftward shift in demand that would result in the quota no longer having an effect on the market? Illustrate your answer using Figure 4-7.

Why has the fight between Uber and the taxicab industry turned political?

The state legislature mandates a price floor for gasoline of PF per gallon. Assess the following statements and illustrate your answer using the figure provided.

  1. Proponents of the law claim it will increase the income of gas station owners. Opponents claim it will hurt gas station owners because they will lose customers.
  2. Proponents claim consumers will be better off because gas stations will provide better service. Opponents claim consumers will be generally worse off because they prefer to buy gas at cheaper prices.
  3. Proponents claim that they are helping gas station owners without hurting anyone else. Opponents claim that consumers are hurt and will end up doing things like buying gas in a nearby state or on the black market.
See all solutions

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