Question

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that Group of answer choices cab fares will be lower. cab fares will be higher. the cost of operating a taxicab will be lower. subway fares will decrease.

Answer 1

Answer:

cab fares will be higher.

Explanation:

The supply of cabs would fall as a result of the limit. The fall in supply would lead to a rightward shift of the demand curve for cabs.

As a result, equilibrium price (cab fares) would increase and equilibrium quantity would fall.

subway is a substitute for cabs

Due to the increase in the price of cabs, there would be an increase in the demand for subway. This would lead to a rise in equilibrium price and quantity