The market for taxi services in a major metropolitan area has thousands of taxis and thousands of potential customers. Taxi services are identical, and buyers have full information about pricing. To become a taxi operator in this city requires a permit, which is difficult and expensive to obtain. Which feature of a perfectly competitive market is violated?

Question

Quizplus · Accepted Answer

The requirement for a difficult and expensive permit to become a taxi operator violates the free entry and exit condition of a perfectly competitive market.

The Market for Taxi Services in a Major Metropolitan Area