1. Suppose that the Mayor of Beşiktaş district requires that each taxicab have a license. The demand for taxi service is Q=510-P, where Q is the quantity of taxi services consumed. Each taxi has cost a total cost TC= 1+Q², not including the cost of the license, and each taxi behaves as a perfect competitor. There is a large number of potential sellers of taxi services. (a) Write down the average total cost function ATC, and the marginal cost function MC. What will be the individual supply curve of a taxi driver. Draw the AC and MC curves on a diagram and show the taxi cab's supply curve. (Hint: Individual taxi cab's supply curve is found by solving for Q from MC-P equality). (b) If the Mayor of Beşiktaş distributes 100 licenses free of charge on a fist come first basis what would be the market supply curve? What would be the market equilibrium price and quantity? What would be the profit of individual taxi cab owner? (c) If the Mayor rather than distributing free of charge, auctions 100 licenses, what will the auction price of the licenses be? How much revenue does the city receive? (d) If the Mayor issues a license to anybody that wants one (free of charge), how many licenses will be issued? (Assume that taxi industry is a constant cost industry) What would be the market equilibrium price and quantity?