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Historically, in many cities, taxi fares were often way above the market equilibrium rate, due to government licensing restrictions. In essence, these taxi cartels used government laws to earn excess profits by erecting barriers to entry. However, modern ridesharing services such as Uber have found innovative ways to bypass these government restrictions, and protests by the taxi industry have been frequent. In some cases, governments responded by banning Uber. Compare and contrast resource allocation and market outcomes under the restricted license system and a competitive system. In which case will it be easier (and cheaper) for customers to get a ride? Do you think governments should ban Uber to increase the profits of taxi drivers? Why or why not?

BuyFind

Economics: Private and Public Choi...

16th Edition
James D. Gwartney + 3 others
Publisher: Cengage Learning
ISBN: 9781305506725
BuyFind

Economics: Private and Public Choi...

16th Edition
James D. Gwartney + 3 others
Publisher: Cengage Learning
ISBN: 9781305506725

Solutions

Chapter
Section
Chapter 24, Problem 9CQ
Textbook Problem

Historically, in many cities, taxi fares were often way above the market equilibrium rate, due to government licensing restrictions. In essence, these taxi cartels used government laws to earn excess profits by erecting barriers to entry. However, modern ridesharing services such as Uber have found innovative ways to bypass these government restrictions, and protests by the taxi industry have been frequent. In some cases, governments responded by banning Uber. Compare and contrast resource allocation and market outcomes under the restricted license system and a competitive system. In which case will it be easier (and cheaper) for customers to get a ride? Do you think governments should ban Uber to increase the profits of taxi drivers? Why or why not?

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