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

question 147

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.Suppose that entry into the taxi industry is restricted but medallions (licences) can be bought and sold.If the annual interest rate on savings accounts is 4% and the market for medallions is in equilibrium,how much will a medallion cost?

• A) $400.
• B) $4000.
• C) $10,000.
• D) $40,000.
• E) $250,000.

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