Without restrictions, the market supply curve is horizontal at P ...

[Charlie]

Without restrictions, the market supply curve is horizontal at P = 5, and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. After the market adjusts to the restricted supply,
 
  A) there will be a decrease in consumer surplus.
  B) the remaining taxi cab drivers will make positive economic profits.
  C) there will be an increase in producer surplus.
  D) All of the above.

Question 2

Without restrictions, the market supply curve is horizontal at P = 5, and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. This results in a deadweight loss of
 
  A) 0.
  B) 5.5.
  C) 12.5.
  D) 25.

[frankwu0507]

Answer to Question 1

A

Answer to Question 2

C