Question

A monopolistic producer of caviar has historically sold all of its caviar to 10 distributors. recently, one of the distributors has acquired all of its competitors, becoming the caviar producer's sole customer. how are the caviar producer's prices and profits likely to change as a result of this downstream consolidation? prices and profits will not change prices and profits will decrease prices and profits will increase prices will decrease and profits will not change

Answer 1

Profits and prices will decrease

Step-by-step explanation:

When there were many customers and only one supplier, the supplier could raise prices and only sell to the suppliers that wanted to pay that price. Now that there is only one supplier to sell the caviar to, the producer has to make that supplier happy or risk not selling the product at all. Thus, in the long run, the prices will likely decrease.