Suppose That the Cost of Operating a Taxicab Is $25,000/year

question 21

Multiple Choice

Suppose that the cost of operating a taxicab is $25,000/year and that a cab in full-time operation will collect $35,000/year in fares.
-Refer to the information above.If taxi medallions (licences) are issued by the city government and cannot be sold,the existence of ________ economic profit would induce ________ the taxi industry.

• A) positive;exit from
• B) positive;entry into
• C) negative;exit from
• D) negative;entry into
• E) zero;no change in

---

Definitions:

Market Acceptance

The degree to which a new product or service is accepted and purchased by customers in the market.

Variable Cost

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.

Fixed Cost

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Variable Cost

Costs that change in proportion to the level of production or business activity.