(Answered) Suppose that a license medallion is required for a taxicab

Statistics

Suppose that a license (medallion) is required for a taxicab. The city has issued a fixed number of licenses and refuses to issue any more. The number issued is such that taxicab drivers are price takers, but (excluding the cost of the license) they earn economic profits of $100,000 a year. The city does not charge for a license. What is the opportunity cost of the license? Is there a barrier to entry as defined in this chapter? Is there a barrier to the entry of productive resources into the provision of taxicab services?

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