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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

On game days, homeowners near Middletown University’s stadium used to rent parking spaces in their driveways to fans at a going rate of \(11. A new town ordinance now sets a maximum parking fee of \)7.

Use the accompanying supply and demand diagram to explain how each of the following corresponds to a price-ceiling concept.

  1. Some homeowners now think it’s not worth the hassle to rent out spaces.
  2. Some fans who used to carpool to the game now drive alone.
  3. Some fans can’t find parking and leave without seeing the game.

Explain how each of the following adverse effects arises from the price ceiling.

d. Some fans now arrive several hours early to find parking.

e. Friends of homeowners near the stadium regularly attend games, even if they aren’t big fans. But some serious fans have given up because of the parking situation.

f. Some homeowners rent spaces for more than $7 but pretend that the buyers are nonpaying friends or family.

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

True or false? Explain your answer. A price ceiling below the equilibrium price of an otherwise efficient market does the following:

  1. Increases quantity supplied
  2. Makes some people who want to consume the good worse off
  3. Makes all producers worse off

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?

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.
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