7. The interaction of individual choices Because a type of fish is on the verge

Question

7. The interaction of individual choices Because a type of fish is on the verge of extinction, the government imposes rules that prohibit fishing in the publicly owned spawning grounds. At first owners of fshing bouts complain about this restriction on where they can fish, but soon they notice that the number of adult fish swimming outside the protected area is much higher than it was before. With the restriction, each fishing boat ends up catching more fish than it did before the r Which of the following principles of economic interaction best describes this scenario? O There is a tradeoff between equality and efficiency O Markets usually lead to efficiency. O When markets do not achieve efficiency,government intervention can improve overall welfare O Markets allocate goodseffectively

Explanation / Answer

Ans: When a market outcome is inefficient, government intervention can improve overall welfare.

Explanation:

Before restriction,the young fish can be caught by the boat owners. Here, the individual interest leads to a bad outcome, i.e., extinction of this type of fish which makes everyone in the fishing industry worse off. If the government prohibits fishing in the spawning grounds where young fish are born and mature, this motivates boat owners to consider alternatives fishing source until the fish mature and reproduce. With this restriction, everyone is better off in the fishing industry.

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