t is 5:22 p.m., and here at the intersection of Fifth Avenue and 42nd Street the rush hour dance is well under way: commuters are weaving toward the subway, lines have formed at the bus stops, hands are in the air for any available cab and a gridlock of cars and buses is on the streets, belching exhaust and raising tempers.

It is a scene about as archetypal as the hot dog vendor in Central Park. But there is something else going on. This Midtown corner is a laboratory. And the experiment under way may reshape the taxicab industry, which has long exasperated and befuddled New Yorkers and tourists alike.

The Taxi and Limousine Commission is measuring air quality and traffic flow at this intersection and four others in Manhattan to decide how many more cabs should be set loose on city streets. Also under review by city regulators is how much the people who hail a cab each day in New York — more than half a million of them — should have to pay to indulge in this modest luxury. The implications are significant, cutting across the political fortunes of Mayor Michael R. Bloomberg, the livelihood of 40,000 cabdrivers, and, of course, the frustration level of New Yorkers as they engage in the fight during busy hours to find an available cab.

"Downtown there are no cabs," Janet Block said as she waited one recent evening at the Pennsylvania Station taxi stand near the end of a line of nearly 80 people. "On the Upper East Side, there are no cabs. Midtown, there are no cabs. No matter where you are, there are no cabs."

If New York City issues 900 new cab medallions, as it is considering, it would be the biggest increase in new cabs since 1937, when the city imposed a taxi cap. And if fares go up, it could further increase the availability of cabs, by enticing more drivers to enter the business.

"Nine hundred more cars in the city of New York might not sound like a lot," said Jonathan Orcutt, associate director of the Tri-State Transportation Campaign, which studies transit in the metropolitan area. "But a cab in the city has a greater impact on traffic than any other vehicle, as its job is to stay in motion and their focus is in Manhattan, below 110th Street." The average cab in the city is driven about 64,000 miles a year.

The political equation for Mr. Bloomberg is a complicated one. His administration has prided itself on its campaigns to ease Midtown traffic, including a crackdown on double-parked trucks and a weekday prohibition against turns on certain crosstown streets. Allow too many new cabs, and some gains he has made could be lost. Mr. Bloomberg is already fighting an image that he is immune to the economic pressures on average New Yorkers, having supported increases in city sales, real estate and property taxes. But if the Taxi and Limousine Commission, whose chairman is appointed by the mayor, rejects or indefinitely delays action on the pending fare increase petitions, an alliance of cabdrivers has already made it clear that there will be a strike.

"If we do strike, it will be successful," said Bhairavi Desai, coordinator of the New York Taxi Workers Alliance, which startled city officials in May 1998 when it organized a one-day strike against new disciplinary rules, a demonstration that left city streets largely bereft of cabs.

Members of the Taxi and Limousine Commission say they want to make their decisions on medallion and fare increases soon, with a vote on higher fares perhaps as early as January. While the addition of most, if not all, of the 900 medallions is likely, Allan J. Fromberg, the deputy commissioner of the Taxi and Limousine Commission, said a fare increase was far from certain. "We need to study it very carefully," Mr. Fromberg said. "The onus is on the industry to document that it needs it."

Three of the nine board members said in interviews that they supported a raise and believed that one would be approved.

"There is going to be a fare increase. That is almost 99 percent sure," said Stanley E. Michaels, a former city councilman who was appointed to the taxi commission recently.

The impetus for the new medallion sale had more to do with a need to balance the city budget than a desire to ease the search for available cabs, city officials acknowledge. Since the city first imposed the cap on the number of cabs in 1937, the value of the painted metal shields mounted on the hoods of cabs has grown from $10 to about $225,000 today. That means that selling 900 new medallions could earn the city an estimated $190 million, a third of which the city is already counting on to help balance this year's budget. The city hopes to sell the first 300 medallions before the end of June.

Adding to yellow cab fleet has long been a tricky political issue. Mayors John V. Lindsay, Edward I. Koch and David N. Dinkins tried during their terms. Doing so now requires the approval of the State Legislature and the City Council.

Mayors also face opposition by taxi owners, who for decades prevented the city from holding an auction, keeping the limit fixed at 11,787, based on an argument that more medallions could dilute their investment and mean more competition for their drivers. During the Koch years, the powerful Bronx Democratic leader Stanley M. Friedman represented the industry and managed to block Mr. Koch's repeated efforts to increase the medallions sold.

Mr. Koch also faced another roadblock. A late-1980's study of traffic and pollution related to his plan to allow 1,800 more cabs found that the city could, at most, add only 400, raising the total to 12,187; any more would have violated clean air rules.

"It was incredibly startling," Mr. Koch said in a recent interview, still frustrated that he could not get a single additional cab onto the streets during his three terms. "People did have difficulty getting cabs. I never understood it."

It was not until the mid-1990's, during the tenure of Mayor Rudolph W. Giuliani, that the city first adjusted the medallion cap, adding the 400 cabs that the traffic study had cleared.

This year Mr. Bloomberg was able to win approval for the 900 new medallions in Albany and from the City Council partly because the industry, which has been pressing for a fare increase, decided not to oppose the sale. The only remaining hurdles are the Taxi and Limousine Commission and the environmental study, which should be complete within a month.

The study, conducted by Urbitran Associates, a New York City engineering firm, is examining how issuing 300, 600 or 900 additional medallions would affect carbon monoxide at five intersections: Fifth Avenue and 42nd Street; Broadway, Columbus Avenue and 65th Street; Third Avenue and 57th Street; Broadway and 34th Street; and Eighth Avenue and 42nd Street. All are notoriously congested spots where cabs are often hard to get, even though cabs make up about half the traffic.

State air monitoring data from an East 34th Street testing station shows that New York City's air has greatly improved since the mid-1980's and that carbon monoxide is consistently far below federal limits. The Bloomberg administration plan would require 9 percent of any new cabs to rely on compressed natural gas or to be hybrid electric-gas vehicles, reducing their emissions impact.

The crucial question the traffic study will answer is whether the new cabs would significantly increase carbon monoxide. A significant increase is defined as consuming half the available cushion between the federal limit and the current air quality.

At the same intersections, the consulting firm is counting overall movement of cars, how often they turn, how long they sit in traffic and how long it takes to move across nearby eight-block sections of the city.

What the study will not answer is the ever-urgent question of just how long, on a rainy day, or at rush hour, a traveler will have to wait for a cab at those high-demand locations. Cab availability, it turns out, has to do with a lot more than simply how many medallions the city allows.

The economy, for one, is a significant force. Most city residents may not realize it, but the recession has made it easier to get a cab in New York now than in 1999.

Cab use goes down in New York City almost in direct correlation to declines in employment at restaurants and bars, declines the city has experienced recently, said Bruce Schaller, a former Taxi and Limousine Commission policy director who runs a cab research and consulting firm. Meanwhile, city data shows that drivers, struggling to make a living, have been putting in more hours. A combined result is that city cabs cruised for 303 million miles in 2002 in search of fares, up from 288 million in 1999, suggesting that it was about 5 percent easier to get a cab last year. This trend may already be reversing as the economy begins to revive.

A fare increase typically means that more people opt to take public transit or to walk, at least initially, making it easier for others to hail cabs. More cabs might also mean fewer sedans would be illegally picking up people trying to hail cabs. That variable also complicates any study of the environmental impact of the medallion increase.

During a recent rush hour at the Fifth Avenue and 42nd Street intersection, would-be taxi riders did not have their hands up for more than a few minutes before a sedan pulled up and offered a ride.

"I'd rather pay a little extra and get going," one man said as he gave up on getting a cab and stepped into a limousine for a $10 ride to Penn Station.

Raising the fare could also affect the availability of cabs — as well as the environmental impact — because more drivers could be drawn into the business, allowing fleet owners to put more cabs on the road for double shifts.

As it stands, a cab ride in New York City is a relative bargain. New York City's average fare of $6.85 (assuming a 2.8-mile trip and about five minutes spent sitting in traffic) is the lowest among the nation's 14 cities with sizable cab fleets, according to a survey by Mr. Schaller. A similar trip would cost $9.19 in Los Angeles and $7.77 in Chicago.

Full-time cabdrivers, on average, take in about $1,375 for working six 12-hour shifts a week, according to Mr. Schaller's analysis of city taxi meter data. After the typical costs for leasing the cab and gasoline are deducted, it works out to about $720 in take-home pay before taxes, according to Mr. Schaller. Ms. Desai, of the Taxi Workers Alliance, said she believed that the average take-home wage, before taxes, was more like $565 a week.

Each driver, of course, has his own story. Mohammed Ahmed, who lives with his wife and two young children in Woodside, Queens, said he took in about $1,200 in fares and tips during his six-day week. Subtract $565 in lease payments for his cab and $150 in gasoline, and that leaves about $500.

"Policemen, firefighters, teachers — their salaries have gone up," said Mr. Ahmed, 38, who said he had more than $10,000 in credit card debt. "It is hard to survive with what I make."

But giving Mr. Ahmed and other cabdrivers an increase is not an easy call for Mr. Bloomberg. In February 2002, he all but endorsed a taxi fare increase, saying during a news conference that "somehow or other, if you don't make it economically attractive for people to drive taxis, the public's not going to have taxis." He also said, "You probably will see some kind of a rate increase."

Since then, however, Mr. Bloomberg has been more circumspect.

"The T.L.C. will follow its charter-mandated process as it considers applications for a fare increase," said Jordan Barowitz, a spokesman for Mr. Bloomberg. "A medallion sale will make it easier for New Yorkers to find a cab and encourage people not to drive their own cars. 2.2 million vehicles travel New York's streets each day; the addition of 900 cabs isn't even a drop in the bucket."

Mr. Koch said that Mr. Bloomberg should put aside any concerns about his political fate and back the fare increase.

"What did you pay seven years ago for a bottle of milk and a pound of steak?" he said, referring to the last time there was a fare increase. "The mayor should do the right thing and people will support it. And the right thing is to issue the additional medallions and allow a fare increase to go through."

The most intense part of the debate might end up being which version of the fare increase should be approved, as the fleet owners and the alliance of drivers have strikingly different requests pending before the city. The Metropolitan Taxicab Board of Trade, which represents fleet owners, wants a 23 percent fare increase, which would produce an average fare of $8.45 and increase the flat rate for a ride from John F. Kennedy International Airport into Manhattan to $49 from $35.

The taxi workers alliance, meanwhile, is pushing for a nearly 50 percent increase, raising the average fare for a 2.8-mile trip to $10.14, not including tip.

The dispute extends beyond the basic fare. Fleet owners want to increase the cap on how much they can charge drivers to lease cabs, while the drivers want a reduction in that cap.

In Midtown, where the battle for cabs is waged every evening, the prospects of a fare increase were greeted with something of a collective shrug. New Yorkers have already seen increases in the subway and bus fare this year, and taxi fare increases often follow close behind.

"I am willing to pay more for the convenience of knowing that there will be a cab when I need one," Amy Innerfield, who lives on the Upper East Side, said while waiting at a Midtown curb for a cab last week. "At least I can get where I want to go."