1. Consider the market for local rides (taxis, Uber Lyft, and so on), which is highly...

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1. Consider the market for local rides (taxis, Uber Lyft, and so on), which is highly competitive. Suppose that the market is initially unregulated, but that the government imposes a binding price floor on the price of rides. That is, the government sets a minimum price for rides that is above the price that prevailed initially. (The price of rides obviously varies with their length. In answering the question, you may find it easier to think of the "price" of rides as being the price per mile, and think of the "quantity" of rides as being the total number of miles.) a. b. How will the new policy affect the price and quantity of rides? When there is the price floor, is it the case that anyone who is willing and able to pay the price of a ride is able to buy one? Is it the case that anyone who wants to sell rides at the price of a ride is able to do so? c. Suppose that instead of imposing a price floor, the government introduces a subsidy to rides (physically paid to the seller). How will the subsidy affect the quantity of rides, the price paid by riders, and the price received by drivers (that is, the price paid by riders plus the subsidy)? d. Is the amount the government spends on the subsidy more, less, or equal to the equilibrium quantity before the subsidy was introduced times the per-unit subsidy (or is it not possible to tell)? e. When there is a subsidy, is it the case that anyone who is willing and able to pay the price of a ride is able to buy one? Is it the case that anyone who wants to sell rides at the price of a ride is able to do so? f. Would imposing the price floor necessarily increase the total revenues of drivers (relative to the case with neither a subsidy nor a price floor)? What about introducing the subsidy (where "total revenues" include the amount drivers receive from the subsidy)? 1. Consider the market for local rides (taxis, Uber Lyft, and so on), which is highly competitive. Suppose that the market is initially unregulated, but that the government imposes a binding price floor on the price of rides. That is, the government sets a minimum price for rides that is above the price that prevailed initially. (The price of rides obviously varies with their length. In answering the question, you may find it easier to think of the "price" of rides as being the price per mile, and think of the "quantity" of rides as being the total number of miles.) a. b. How will the new policy affect the price and quantity of rides? When there is the price floor, is it the case that anyone who is willing and able to pay the price of a ride is able to buy one? Is it the case that anyone who wants to sell rides at the price of a ride is able to do so? c. Suppose that instead of imposing a price floor, the government introduces a subsidy to rides (physically paid to the seller). How will the subsidy affect the quantity of rides, the price paid by riders, and the price received by drivers (that is, the price paid by riders plus the subsidy)? d. Is the amount the government spends on the subsidy more, less, or equal to the equilibrium quantity before the subsidy was introduced times the per-unit subsidy (or is it not possible to tell)? e. When there is a subsidy, is it the case that anyone who is willing and able to pay the price of a ride is able to buy one? Is it the case that anyone who wants to sell rides at the price of a ride is able to do so? f. Would imposing the price floor necessarily increase the total revenues of drivers (relative to the case with neither a subsidy nor a price floor)? What about introducing the subsidy (where "total revenues" include the amount drivers receive from the subsidy)?

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a The imposition of a binding price floor will result in an increase in the price of rides per mile and a decrease in the quantity of rides This is be... View the full answer