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Consider the taxicab example from class. Suppose that the market demand increases to P(Q) = 1.2Q/100, 000, but everything else remains unchanged. That is, there
Consider the taxicab example from class. Suppose that the market demand increases to P(Q) = 1.2Q/100, 000,
but everything else remains unchanged. That is, there are 6 non-transferable taxi licenses and each taxi driver has the same opportunity cost function given by C(q) = 0.20q with a capacity of 10,000 miles. What is
(a) the equilibrium price, (b) the economic profit each firm earns from owning the license? (c) the deadweight loss of restricting the number of licenses to 6?
dont answer by pen paper
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