Question

Redo all the parts of Problem, describing the long-run effects instead of the short-run effects. Assume that cab driving is an increasing-cost industry.
a. The price of gas falls.
b. The rental price of cabs falls.
c. Word gets out that Gus is a really lousy driver.
d. A new bus company opens up.
e. Gus gets the bill for the new upholstery he installed in his back seat last month and discovers it's 15% more than he expected.
f. The wages of factory workers go up, though this ends up having no effect on the demand for cab rides.
g. A huge fire destroys half the cabs in town, not including Gus's.
h. The city imposes a $1 excise tax on cab rides, but exempts Gus from the tax because he is a good friend of the mayor.
i. The city imposes a $100 annual license fee on cab drivers, but gives Gus a free license because he is a good friend of the mayor.
j. The city starts a new free taxi service, which offers free rides to 500 customers per day.
k. The city offers to subsidize gas purchases for every cab driver except Gus because he is a special enemy of the mayor.
l. The city announces that it will start fining cab drivers who play loud music; Gus (unlike most cab drivers) loves loud music, so he has to pay a lot of fines.
m. A customer who was almost killed by Gus's recklessness agrees to accept a large payment in exchange for keeping quiet about the incident.



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  • CreatedJanuary 24, 2013
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