1.Effects of Tightening the Medallion Policy. Consider the example of taxi medallions shown in Figure 21.6 on page 472. Suppose the government tightens the policy, decreasing the number of medallions from 80 to 70.
a. The price of taxi service will change from $
to $
.
b. The miles of taxi service will change from miles to
miles.
c. At the margin an excluded customer would be willing to pay up to $
for a mile of taxi service, while an excluded supplier would be willing to supply a mile of taxi service at a price as low as $
.
2. Equilibrium and Surplus in a Liver Market. The following table shows different points on the linear supply curve and linear demand curve for livers for transplant.
a. . Draw the two curves and show the market equilibrium. The equilibrium price is $
, and the equilibrium quantity is
livers.
b. On your graph, show the total surplus of the liver market—the sum of consumer and producer surplus.
c. Suppose the government bans the buying and selling of livers. On your graph, show the new equilibrium quantity of livers and the resulting loss in the total value of the market.