If a firm expects that the price of its product will be lower in the future than it is today
A)the firm has an incentive to increase supply now and decrease supply in the future.
B)the firm has an incentive to decrease supply now and increase supply in the future.
C)the firm has an incentive to increase quantity supplied now and decrease quantity supplied in the future.
D)the firm will not change supply until it knows for certain what will happen to its price.

Question

Quizplus · Accepted Answer

CBoth A and C are correct because if a firm expects lower prices in the future, it has an incentive to sell more now (increase supply or quantity supplied) when prices are higher, and sell less in the future (decrease supply or quantity supplied) when prices are expected to be lower. This strategy maximizes the firm's revenue.

If a Firm Expects That the Price of Its Product