Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:
A)cabs and fares are both above the efficient level.
B)cabs is less than the efficient quantity and fares are above free-market levels.
C)cabs is above the efficient level and fares are depressed below the free-market level.
D)cabs and fares are both below the efficient level.

Question

Quizplus · Accepted Answer

Issuing a fixed number of licenses limits the supply of taxicabs, which would likely result in fewer cabs than the efficient market quantity and higher fares than in a free-market scenario due to reduced competition and limited supply.

Issuing a Fixed Number of Licenses to Operate a Taxicab