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# The accompanying diagram illustrates a taxi drivers individual supply curve. (Assume

ISBN: 9781429218276 428

## Solution for problem 11 Chapter section 9

Krugman's Economics for AP* | 2nd Edition

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Problem 11

The accompanying diagram illustrates a taxi drivers individual supply curve. (Assume that each taxi ride is the same distance.) a. Suppose the city sets the price of taxi rides at \$4 per ride, and at \$4 the taxi driver is able to sell as many taxi rides as he desires. What is this taxi drivers producer surplus? (Recall that the area of a right triangle is 1 2 the height of the triangle the base of the triangle.) b. Suppose that the city keeps the price of a taxi ride set at \$4, but it decides to charge taxi drivers a licensing fee. What is the maximum licensing fee the city could extract from this taxi driver? c. Suppose that the city allowed the price of taxi rides to increase to \$8 per ride. Again assume that, at this price, the taxi driver sells as many rides as he is willing to offer. How much producer surplus does an individual taxi driver now get? What is the maximum licensing fee the city could charge this taxi driver?

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8.31.16 CH. 5 Wk. 2 Wednesday, August 31, 2016 11:12 AM Learning Objective 1 • Informal Research Methods ○ Search company digital or other files ○ Talk with the boss ○ Interview the target audience ○ Conduct an informal survey • Formal Research Methods ○ Access Electronically ○ Search Manually ○ Investigate primary sources ○ Conduct scientific experiments Learning Objective 2 • Tips for Product Brainstorming ○ Define the problem ○ Establish time limits ○ Set a goal; focus on quality rather than quantity ○ Require participation ○ Encourage out-of-boxthinking ○ Write down ideas ○ Organize and classify ideas • Grouping Ideas to Show Relationships

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