In 1998, a New York City taxicab medallion had a market value of 230,000. If the interest rate is 6 percent and entry conditions are not expected to change in the future, what is the amount of above-normal profits earned annually?

2. If you bought a New York City taxicab medallion and operated a taxicab would you be earning above-normal rate of return on your investment? Explain.

3. Assume a franchise is to be auctioned off where market demand is 100 P. Suppose there are just two firms competing for this franchise. One firms cost function is C1(q) = 100 + q while the other firms cost function is C2(q) = 12q . The franchise is auctioned off using a modified English auction (where the firm offering the lowest price for service wins the franchise). a. Who will win the franchise? b. What will the winning franchise fee be? c. What will price be?

4. Should local telephone companies be allowed to operate a cable system? If so, how should they be regulated?