Cities like San Francisco and New York that require a driver to buy a$$ city$-$issued taxi medallion before the driver can legally operate a taxi are shifting the supply curve for taxis to the left relative to where it would be without the requirement for a medallion.

a$.$ Briefly explain why the supply curve for taxi rides shifts to the left. What is the effect on the market price of taxi rides from the medallion$$ requirement?

The supply curve for taxi rides shifts to the left because

A$.$

the quantity of taxis available is lower because the city issues only a limited number of medallions. The equilibrium price for taxi rides will increase.

B$.$

consumer preferences for taking taxis is declining. The equilibrium price for taxi rides will decrease.

C$.$

the quantity of taxis available is lower because the city issues only a limited number of medallions. The equilibrium price for taxi rides will decrease.

D$.$

consumer preferences for taking taxis is declining. The equilibrium price for taxi rides will increase.

Part $2$

b$.$ According to a news$$ report, in$2008,$ medallions in San Francisco were selling for$$ $$250,000.$ In late$2018,$ "the market for taxi medallions in San Francisco is now totally frozen. No one has bought or sold one in over two$$ years."

$$Source: Sam$$ Harnett, "Cities Made Millions Selling Taxi$$ Medallions, Now Drivers Are Paying the$$ Price," npr$.$org, October$15,2018.$

Why would taxi medallions have been worth$$ $$250,000$ in$2008?$ Why was it apparently impossible to sell them at any price in$2018?$

In$2008,$

A$.$

taxis were the only means of public tranportation in San$$ Francisco, and given the small supply of the$$ medallions, the equilibrium price skyrocketed. By$2018,$ people viewed taxis as an unsafe form of transportation and decreased their demand for taxi$$ rides, thereby reducing the need for a medallion.

B$.$

the taxi business was very profitable in San$$ Francisco, and given the small supply of the$$ medallions, the equilibrium price skyrocketed. By$2018,$ people viewed taxis as an unsafe form of transportation and decreased their demand for taxi$$ rides, thereby reducing the need for a medallion.

C$.$

taxis were the only means of public tranportation in San$$ Francisco, and given the small supply of the$$ medallions, the equilibrium price skyrocketed. By$2018,$ the increased popularity of rideshare companies like Uber and Lyft made it possible for individuals to provide taxi service without purchasing a medallion.

D$.$

the taxi business was very profitable in San$$ Francisco, and given the small supply of the$$ medallions, the equilibrium price skyrocketed. By$2018,$ the increased popularity of rideshare companies like Uber and Lyft made it possible for individuals to provide taxi service without purchasing a medallion.