Question

In: Economics

Under normal market conditions, if your profits are greater than your average total costs, it is...

Under normal market conditions, if your profits are greater than your average total costs, it is called making a profit and new firms try to enter the industry and existing firms expand. If your profits are lower than your average total costs, firms operate at a loss, and often exit the industry or contract. If your profit matches your average total cost, it is called breaking even and most firms operate at their current capacity.

However, not all industries are able to enter a market because of barriers to entry. Patents on goods prevent other firms from producing a similar product. Monopolistic or oligopolistic endeavors lead to the control of the most essential factors of producing the goods. Control of the means of distribution prevent firms from competing, Brand loyalty puts demand for certain products far above others that there is no way for them to catch up. Also, government regulation prevents new firms from developing and marketing products, such as putting licensing requirements on physicians and cab drivers.

Speaking of cab drivers, let's talk Uber. Uber is a relatively new service competing directly with taxi services, in which individuals use their own cars for ride sharing for which they can charge. My question to you is "Is that a good thing"; Uber is on course to put taxis out of business. Taxis are very strictly regulated, while Uber is not. So what are the pros and cons of having Uber around? Furthermore, should licensing be so stringent for physicians, teachers, attorneys, accountants, and architects? We have a dearth of physicians, and teachers are complaining that the licensing requirements do not match the monetary gains, so it is likely that fewer and fewer teachers will be licensed in the coming years. What are your thoughts on that as well?

Solutions

Expert Solution

Uber has become a competition to the local taxis. The pros of user can be listed under:

1. The price of uber taxi us relatively less than the normal ones when surcharge pricing is not considered .

2. Uber taxis are hassle free as one can get them at any time if the day.

3. The payment system for the User taxi is easy as card payment can be done directly without having to wait for any cash payment. Moreover, card payment can be done later in also after arrival of the destination. This saves time for the passengers.

4. The user drivers can be rated so the behave well. Again passengers can also be rated so the passengers also behave well.

5. The user driver can see the destination of the passengers after they pick up the passengers, dochsnces of cancellation is less.

The cons of Uber are ;

1. The surcharge pricing when demand is very high for the cars is a problem.

2. Uber drivers sometimes cancel the rides.

3 .There as been safety issues of Uber in some countries.

4. Uber drivers are demanded to have new cars, do the driver ends up in spending their savings to buy a new car.

5. User drivers sometimes do not arrive to pick up the passengers in time.

It is better to relax the licensing for the physicians as the licensing exceeds their monetary gains. To remove the dearth of the physicians it's better to relax the licensing in them. Here, not relaxing to license the physicians will result in a dearth of physicians , thereby leading to an increased cost of physicians in the market. This will thereby affect the health sector of the economy as prices of physicians will rise .

Similarly, for teachers if licensing gains do not exceed their monetary gains in this case he teachers will not wish to license themselves. This will create a dearty if teachers in the sector. Thereby the demand for teachers in the market will rise giving a rise to the educational cost of the students. Hence, it is better to license the teachers so bit to raise the cost of education in the future. Moreover, less number of teachers will create a dearth of teachers in the schools.


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