Refer to the accompanying figure. Suppose the solid line represents the current supply of Star Wars action figures. If retailers learn that a new Star Wars movie will be released in several months, this news is likely to cause:
A)a decrease in the quantity supplied, but no change in current supply.
B)neither a change in supply nor a change in quantity supplied since only future demand will change.
C)current supply to shift to S(B)in anticipation of higher future prices.
D)current supply to shift to S(A)in anticipation of higher future prices.

Question

Refer to the accompanying figure. Suppose the solid line represents the current supply of Star Wars action figures. If retailers learn that a new Star Wars movie will be released in several months, this news is likely to cause: 
A)a decrease in the quantity supplied, but no change in current supply.
B)neither a change in supply nor a change in quantity supplied since only future demand will change.
C)current supply to shift to S(B)in anticipation of higher future prices.
D)current supply to shift to S(A)in anticipation of higher future prices.

Quizplus · Accepted Answer

If firms believe that the price will rise in the future, they will reduce their current supply in order to sell more when prices are higher.

Refer to the Accompanying Figure