Suppose that milk producers expect that the price of milk is going to drop next week. This would cause
A) a decrease in the supply of milk today.
B) an increase in the supply of milk today.
C) an increase in the demand for milk today.
D) the selling price of milk to rise today.

Question

Quizplus · Accepted Answer

If milk producers expect that the price of milk is going to drop next week, they are likely to increase the supply of milk today to sell more at the current higher price, before the price drops. This anticipatory action is based on trying to maximize revenue before an expected decrease in price.

Suppose That Milk Producers Expect That the Price of Milk