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:

Monthly

Occurring, produced, or done every month.

Semi-Annually Compounded

Interest calculation method where the interest is added to the principal on a half-yearly basis.

Nominal Rate

The stated interest rate of a bond or loan, not accounting for inflation or compounding effects, also known as the annual percentage rate (APR).

Compounded Monthly

An interest calculation method where interest earned is added to the principal each month, affecting subsequent interest calculations.