Scenario 5-4 Suppose the Government Is Concerned About Firms in the United

question 382

Multiple Choice

Scenario 5-4
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
-Refer to Scenario 5-4.What would we expect to observe in the caviar market?

• A) Equilibrium prices and quantities will increase.
• B) Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
• C) Total revenues to caviar firms will increase if the demand for caviar is inelastic.
• D) All of the above are correct.

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Definitions:

Table: Price Elasticity

A tabulated representation that shows how the quantity demanded of a good or service responds to changes in its price, indicating the sensitivity of consumers to price changes.

Midpoint Formula

A method used in economics and mathematics to calculate the average of two points on a line, often employed to find the elasticity of demand.

Chocolate-Covered Peanuts

Peanuts that have been coated in chocolate, serving as a sweet and crunchy snack.

Total Revenue

The total value of sales of a good or service (the price of the good or service multiplied by the quantity sold).