Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 4: Q1. (page 189)

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?

Short Answer

Expert verified
  1. The price of a rise will be $7.
  2. The quota rent will be $4.
  3. The quota rent will be $1.

Step by step solution

01

Explanation for part (a)

The price of a ride will be $7 for the demand of 6 million rides. Hence, the demand price for 6 million rides will be $7.

The demand price is represented by point A.

02

Explanation for part (b)

The quota rent will be the difference between demand price and supply price. The demand price is $7, and the supply price is $3; thus, the quota rent will be $4 (=7 – 3).

03

Explanation for part (c)

The demand price for 9 million rides will be $5.50, and the supply price for 9 million rides will be $4.50. Thus, the quota rent will be $1 (=5.50 – 4.50).

The demand price is represented by point C, and the supply price is represented by point D.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Use a graph to illustrate the effect of the entry of Uber on the incomes of taxicab drivers. Assume that Uber cars cannot pick up fares hailed from the street and that there are some people who prefer to hail cabs rather than use an app. How does your graph change if that restriction is lifted?

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

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

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.

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.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free