1.New York City restricts the number of taxi medallions.As a result of the restrictions the taxi industry is surprisingly profitable.However, it is currently the case that very few taxi medallion owners actually drive a taxi.Typically what medallion owners do is hire someone else to drive the taxi for them.Currently, medallion owners are paying drivers $10 per hour.Recently a group of taxi drivers protested city hall.The taxi drivers are requesting that the restrictions on the fares that taxis can charge be raised.Let's assume that taxi drivers are successful in raising taxi fares.

a.TFU and explain: As a result of the fare increases, taxi-driver wages will increase. (5)

b.TFU and explain: If you decide to purchase a taxi medallion after the new fare increase is announced, will you end up making larger profits than if the fares hadn't been increased? (5)

Uber has recently become an effective competitor to the traditional taxi business.What effect will Uber have on taxi medallion prices and taxi wages?