Imagine that Jimsville has 95 taxi cabs operating in a perfectly competitive market.
Question # 00209355
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Updated on: 02/28/2016 10:58 PM Due on: 03/29/2016
1. Imagine that Jimsville has 95 taxi cabs operating in a perfectly competitive market. Now Uber enters the town. The market demand curve for taxi's becomes D = 1000 - 20P + 1000U (where P is the cab price and U is the Uber price). Assume that the marginal cost of a cab ride is $5 and that the average cab has a capacity of 20 trips per day. The Uber fare is set at $1.00 per ride.
A. Find the short-run equilibrium - that is, the price per cab ride, the number of rides per day per cab (quantity), and the economic (extra-normal) profit per cab.
B. is the taxicab market in long-run equilibrium ?
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Solution: Imagine that Jimsville has 95 taxi cabs operating in a perfectly competitive market.