8. It is expensive to become a taxi driver in London. Before starting, one must spend three years studying to pass a difficult exam (resulting in £30,000 lost earnings) and buy a taxicab for £40,000. Uber drivers also must pay £40,000 for a new car, but do not need to pass an exam before driving. Costs per journey are the same for each type of driver and increase as the car starts to require repairs. Average variable costs at 500, 1000, 1500 and 2000 journeys are £10, £30, £50, and £70. (a) Graph the average fixed costs for an UBER driver and a taxi driver after 500, 1000, 1500 and 2000 journeys. (b) The government allows UBER and taxi drivers to compete freely. What happens in the market for rides? In answering the questions below, a full response uses a graph and the numbers from part a). Answers can be approximate but must be consistent with your graph. i. What is the market price for a journey in the long run.. ii. How many journeys will a typical UBER and taxi driver provide?

8. It is expensive to become a taxi driver in London. Before starting, one must spend three years studying to pass a difficult exam (resulting in £30,000 lost earnings) and buy a taxicab for £40,000. Uber drivers also must pay £40,000 for a new car, but do not need to pass an exam before driving. Costs per journey are the same for each type of driver and increase as the car starts to require repairs. Average variable costs at 500, 1000, 1500 and 2000 journeys are £10, £30, £50, and £70. (a) Graph the average fixed costs for an UBER driver and a taxi driver after 500, 1000, 1500 and 2000 journeys. (b) The government allows UBER and taxi drivers to compete freely. What happens in the market for rides? In answering the questions below, a full response uses a graph and the numbers from part a). Answers can be approximate but must be consistent with your graph. i. What is the market price for a journey in the long run.. ii. How many journeys will a typical UBER and taxi driver provide?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 8PA

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