Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 5, Problem 5.2.10PA
To determine
The economic efficiency in recline seat.
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The accompanying diagram shows the demand and supply
curves for taxi rides in New York City.
Uber's entry into the market reduces the quantity of rides
demanded from taxis at every price. On the accompanying
graph, shift the demand curve to accurately represent the
change in demand. Then, move point E₁ to the new
equilibrium point. The unlabeled point is to help you answer
the next question and is not movable.
Assume that New York City politicians respond by imposing
a regulated price of $2.50 per mile. Calculate consumer
surplus, producer surplus, and total surplus for the taxi
market after Uber has entered the market.
Consumer surplus: $ 750
Producer surplus: $ 600
Total surplus: $ 1350
million
million
million
Price ($ per mile)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
0
2.50
1.30
Market for Taxi Rides in NYC
D
240.00
S
600.00
120 240 360 480 600 720 840 960 1,080 1,200
Quantity of taxi rides (millions of miles)
Consider the market for CD players, illustrated in the figure to the right. Suppose there are network
externalities in this market such that the quantity of a good demanded grows in response to the
growth of purchases by other individuals (as indicated by the demand curve "Demand" in
the figure). Suppose that the price is initially $110 where the quantity demanded is 90 (thousand
CD players per month).
If the price of CD players falls to $50, demand will increase to thousand CD players per month.
(Enter your response using an integer.)
of this increase, thousand units of the 90 thousand-unit increase is the pure price effect and
thousand units of the increase is the bandwagon effect.
The bandwagon effect causes the demand for CD players to be more
otherwise be the case (without network externalities).
▼than would
200-
180
160 Demand
140
120-
100-
80-
60-
40-
20-
0+
0
Deo
20
D150
D80 P120 P180
40 60 80 100 120 140 160 180 200 220
CD Players (thousands per month)
Q
Next
Refer to Figure 4-8. To legally drive a taxicab in New York City, you must have a medallion issued by the city government. Assume that only 13,200 medallions have been issued. Let's also assume this puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day, because no one breaks the law by driving a taxi without a medallion. Assume as well that each taxi provides 6 trips per day. In that case, the quantity of taxi rides supplied is 79,200 (or 6 rides per taxi × 13,200 taxis). This is shown in the diagram with a vertical line at this quantity. Assume that there are no government controls on the prices that drivers can charge for rides.
a.
What would the equilibrium price and quantity be in this market if there was no medallion requirement?
b.
If there was no medallion requirement, indicate the area that represents consumer surplus.
c.
If there was no medallion requirement, indicate the area that represents producer surplus.
d.
If there was no…
Chapter 5 Solutions
Microeconomics (7th Edition)
Ch. 5 - Prob. 5.1.1RQCh. 5 - Prob. 5.1.2RQCh. 5 - Prob. 5.1.3RQCh. 5 - Prob. 5.1.4RQCh. 5 - Prob. 5.1.5RQCh. 5 - Prob. 5.1.6PACh. 5 - Prob. 5.1.7PACh. 5 - Prob. 5.1.8PACh. 5 - Prob. 5.1.9PACh. 5 - Prob. 5.1.10PA
Ch. 5 - Prob. 5.1.11PACh. 5 - Prob. 5.1.12PACh. 5 - Prob. 5.1.13PACh. 5 - Prob. 5.2.1RQCh. 5 - Prob. 5.2.2RQCh. 5 - Prob. 5.2.3RQCh. 5 - Prob. 5.2.4PACh. 5 - Prob. 5.2.5PACh. 5 - Prob. 5.2.6PACh. 5 - Prob. 5.2.7PACh. 5 - Prob. 5.2.8PACh. 5 - Prob. 5.2.9PACh. 5 - Prob. 5.2.10PACh. 5 - Prob. 5.2.11PACh. 5 - Prob. 5.3.1RQCh. 5 - Prob. 5.3.2RQCh. 5 - Prob. 5.3.3RQCh. 5 - Prob. 5.3.4PACh. 5 - Prob. 5.3.5PACh. 5 - Prob. 5.3.6PACh. 5 - Prob. 5.3.7PACh. 5 - Prob. 5.3.8PACh. 5 - Prob. 5.3.9PACh. 5 - Prob. 5.3.10PACh. 5 - Prob. 5.3.11PACh. 5 - Prob. 5.3.12PACh. 5 - Prob. 5.3.13PACh. 5 - Prob. 5.3.14PACh. 5 - Prob. 5.3.15PACh. 5 - Prob. 5.3.16PACh. 5 - Prob. 5.4.1RQCh. 5 - Prob. 5.4.2RQCh. 5 - Prob. 5.4.3RQCh. 5 - Prob. 5.4.4PACh. 5 - Prob. 5.4.5PACh. 5 - Prob. 5.4.6PACh. 5 - Prob. 5.4.7PACh. 5 - Prob. 5.4.8PACh. 5 - Prob. 5.4.9PACh. 5 - Prob. 5.4.10PACh. 5 - Prob. 5.4.11PACh. 5 - Prob. 5.4.12PACh. 5 - Prob. 5.1CTECh. 5 - Prob. 5.2CTE
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