Suppose Anyone with a Driver's License Is Capable of Supplying

question 84

Essay

Suppose anyone with a driver's license is capable of supplying one trip from the airport to the downtown business center on any given day.The long-run supply curve of such trips is horizontal at p = $50,which is the average cost of such trips.Suppose daily demand is Q = 1000 - 10p.Calculate the change in consumer surplus,producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license,and the government will issue only 300 licenses.

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Definitions:

Subsidy

A financial contribution granted by the government to support or promote economic activities.

Direct Assistance

Support or aid provided directly to individuals, organizations, or countries, often in the form of resources, financing, or services.

Tax Breaks

Financial incentives or discounts in taxation provided by the government to encourage certain activities or investments.

Tariffs

Taxes imposed on imported goods aimed at making them more expensive than similar locally-produced goods to protect domestic industries from foreign competition.