# Explain why the Government Taxi Authority has an incentive to only issue one licence.

In Lumino City, the taxi industry is regulated by the Government Taxi Authority. A company can only supply taxi services, in Lumino City, if it is issued a licence by the Government Taxi Authority. (Note: A licence does not place a limit on the number of taxi trips a company can supply.)
The market for taxi trips in Lumino City has the following characteristics: Inverse demand for taxi trips is given by the function,
P = 90−
Q 1000
.
In this equation, P is the price of a taxi trip, and Q is the total quantity of taxi trips supplied by licensed taxi companies. The marginal cost, to a taxi company, of supplying a taxi trip is \$18. A taxi company’s only ﬁxed cost is the cost of purchasing a licence from the Government Taxi Authority.
Question 1: Suppose that the Government Taxi Authority issues only one license, to Big Ben Taxis. Assuming uniform pricing, ﬁnd the quantity of taxi trips that Big Ben Taxis will choose to supply, and the price at which these trips will be sold. Neglecting the cost of the license, what proﬁt will Big Ben Taxis earn. (8 Marks)
Question 2: Now suppose that the Government Taxi Authority issues two licenses, to Big Ben Taxis and Whitehall Taxis. Find the equilibrium price and quantities for the case in which the two taxi companies engage in Cournot (quantity) competition. Neglecting the cost of the license, what proﬁts will Big Ben Taxis and Whitehall Taxis earn. (8 Marks)
Question 3: Now suppose that the Government Taxi Authority oﬀers an unlimited number of licences for sale at a price of \$600,000 per license. How many companies will purchase a license? Brieﬂy explain. (You should assume that, if more than one ﬁrm is present in the market, ﬁrms engage in Cournot competition.) (4 Marks)
Question 4: Repeat question 2 for the case in which the two ﬁrms engage in homogeneous goods Bertrand (price) competition. (3 Marks)
Question 5: Explain why the Government Taxi Authority has an incentive to only issue one licence. What problem does the Government Taxi Authority create if it only issues one licence? (2 Marks)

Pages (550 words)
Approximate price: -

Why Homework Market

Quality Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Qualified Writers

We have hired a team of professional writers experienced in academic and business writing. Most of them are native speakers and PhD holders able to take care of any assignment you need help with.

Unlimited Revision

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account.

Timely Delivery

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. We will always strive to deliver on time.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text.

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Homework Market Writing Services

No need to work on essay at night. Sleep tight, we will cover your back. We offer all kinds of essay writing services.

## Essay Writing Services

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.