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