The Hong Kong taxi industry is regulated in several aspects. The fare for taxi rides is regulated by the government. However, there is a phenomenon called discount taxi in Hong Kong. The government also controls the number of taxi licenses to control the maximum number of taxis on the streets. The government has not issued new licenses in recent years. Taxi licenses are transferrable. Currently, such licenses can command a market price of several Hong Kong million dollars.

(a) Use demand and supply to explain the phenomenon of 'discount taxis' and two other phenomena (one during rush hours and one during non-rush hours) that indicate the taxi market is probably not at "equilibrium".

(b) Discuss how the introduction of Uber affects the market of taxi in Hong Kong.

(c) It is observed that license price rises rapidly while the current rental cost is rather stable. Give two possible reasons to explain this.

Question 2 The government is now considering to renovate its coliseum, which is the only venue for organising the events over 10,000 audiences. This renovation project is expected to be completed by 9 months and all functions/events would be suspended during this period. After the completion, the facilities and equipment in the coliseum are much improved and the capacity of audiences is increased by 5%. It will also be the landmark of this country and attract international performers to have functions in it. However, two events have already reserved during this renovation period, which means that the government is going to break the contract with the host parties and compensation is required.

If you are the consultant of this renovation project, what kind of information do you need to collect to determine whether this project is a sound investment? )

Question 3

Nana Company is now manufacturing Model-N notebook computers. It collected average annual sales figures (in number of units sold) from its 40 branch offices and dealerships across the region. When these data are entered into a spreadsheet, it looks like the following table.

Coefficients Tstatistic P-value

Intercept 430 6.68 0.0003

Price of the Model-N notebook (PN) -3.3 -2.84 0.0022

Price of a competing-brand notebook (PC) 2.8 2.32 0.0013

Average annual income of households (M) 0.8 3.84 0.0008

Annual dollar expenditures on advertising (A) 0.004 2.64 0.0006

R2 = 0.75, F=41.95, Significance F = 0.013

PN=$13,000, PC=$15,000 , M=$35,000 , A=$4,800

Based on these estimates, write a brief proposal on how to boost the revenue of ModelN notebook computers.

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