Question

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.
What would we expect to observe in the caviar market?

Answer 1

Answer:

C

Explanation:

here are the options to this question

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

As a result of the increased government scrutiny of caviar, the supply of caviar would fall and a result of this, prices would rise.

if prices rise and demand is inelastic, the total revenue of caviar firms would rise.

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

As a result of the rise in price of caviar, there would be little or no change in quantity demanded and total revenue of these firms would rise