Scenario 5-6 Suppose the Government Is Concerned About Firms in the United

question 521

Multiple Choice

Scenario 5-6
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 5-6. 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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