Micro Economics & Macro Economics Q2 (A) The London "black cab" taxis are amongst some of the expensive in the world. They complete to some extent with minicabs, which tend to be cheaper. However, minicabs are not allowed to pick up customers off the street, they have to be booked in advance, and their drivers do not have to memorize a London street map. minicabs operate in a more competitive market and require less of the drivers. Black cab(licensed) cab drivers must pass a background check and medical test and pay fees over 200 pounds. This may help to ensure that passengers are safe and drivers are accountable, but it also means that they have a monopoly on picking up people on the streets? Elaborate on the given market structure (Black cabs and Minicabs) and discuss the Implications for Markets with High Barriers to Entry.
Ans :
Introduction
The London taxi market shows how a regulated industry interacts with microeconomic and macroeconomic issues. The contrast between black cabs and minicabs reveals a distinct market structure characterized by significant entry hurdles for black cabs, resulting in a monopoly on street-hail services.
Concept & Application
London’s taxi market is divided into two categories: black cabs (licensed taxis) and minicabs. Black cabs have monopoly power since they have exclusive rights to pick up passengers on the street. This monopoly is strengthened by severe laws that compel drivers to complete arduous tests, background checks, and medical examinations, as well as pay high licensing fees.
Conclusion
The structure of the London taxi market, which is characterized by black cab monopoly power and competition from minicabs, demonstrates the influence of high entry barriers on market dynamics.
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