Assume that the taxi industry operates in an unregulated market and is characterized by monopolistic competition. Assume also that taxis and Uber are substitutes.
(i) Using diagrams, illustrate and discuss the long-run equilibrium of the taxi industry and individual monopolistic competitive taxi companies before and after the introduction of UberX. (Hint: use one diagram for the industry and a separate diagram for the individual taxi company.)
(ii) To what extent does the monopolistic competition model accurately reflect the taxi market in Victoria?
(iii) To what extent does the oligopoly, or the monopoly, model accurately reflect the taxi market in Victoria?