Many U.S. cities limit the number of taxis by restricting the number of licenses. The result, in comparison with free entry into the taxi industry, is
A)better taxi service.
B)increased competition in the taxi industry.
C)higher taxi fares.
D)lower taxi fares.
E)free taxi rides.

Question

Quizplus · Accepted Answer

Limiting the number of licenses for taxis creates a limited supply of taxis in the market, which results in higher taxi fares due to increased demand for a limited number of taxis. It also limits competition in the industry, as the restricted number of licenses makes it harder for new companies to enter the market and compete against established taxi companies. Therefore, the result of limiting taxi licenses is often higher prices for consumers.

Many US Cities Limit the Number of Taxis by Restricting the the Number