To own a taxicab in New York City, you must own a medallion. New York City regulates the number of official cabs by limiting the number of medallions. Explain why the New York cab industry is not competitive by reviewing the four conditions necessary for competition. NYC violates which one?
The characteristics of perfect competition are many firms, identical products, no barriers to entry or exit, and perfect information for buyers and sellers. The medallion is a barrier to entry to new firms, which can only enter the industry by buying a medallion from existing taxicab owners.
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