A firm has an incentive to decrease supply now and increase supply in the future if it expects that
A)more firms will enter the market in the future.
B)the prices of inputs used to produce its product will rise in the future.
C)the price of its product will be lower in the future than it is today.
D)the price of its product will be higher in the future than it is today.

Question

Quizplus · Accepted Answer

If the firm expects the price of its product to be higher in the future than it is today, it has an incentive to decrease supply now and increase supply in the future to take advantage of the higher price. However, if the firm expects the price of its product to be lower in the future than it is today or if it expects more firms to enter the market in the future, it may choose to increase supply now to capture as much market share as possible before these events occur. Additionally, if the prices of inputs used to produce the firm's product are expected to rise in the future, the firm may choose to increase supply now to take advantage of the lower input costs.

A Firm Has an Incentive to Decrease Supply Now and Increase