Question

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 fishing boats 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 restriction was in place.

Which of the following principles of economic interaction best describes this scenario?

When a market outcome is inefficient, government intervention can improve overall welfare. In this case, since the young fish can be caught by any boat owner, the individual pursuit of self-interest leads to a bad outcome—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 until the fish mature and reproduce. With this restriction, everyone is better off in the end.

Answer 1

Answer is When markets do not achieve efficiency, government intervention can improve overall welfare.

Refer below.

Step-by-step explanation:

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 fishing boats 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 restriction was in place.

The following principle of economic interaction best describes this scenario:

When markets do not achieve efficiency, government intervention can improve overall welfare.