Final answer:
If the profitability of plastic toys increases, suppliers may move resources to produce more toys, which leads to a decrease in the supply of plastic containers, corresponding to answer D.
Step-by-step explanation:
If the prices and profitability of plastic toys increase, manufacturers may allocate more resources to the production of toys, thus reducing the production of plastic containers. Therefore, the correct answer is D. Supply of plastic containers will decrease.
To further explain, this scenario is similar to the concept that an improvement in product quality or an increase in standards can impact the supply and demand in a market. For instance, if there's an improvement in technology that reduces production costs, this would typically increase supply, leading to a rightward or downward shift in the supply curve. However, in the given scenario, because the production resources are being redirected to the more profitable plastic toys, it would lead to a leftward shift in the supply curve of plastic containers, indicating a decrease in supply at every price level.
An increase in the price and profitability of one good (toys) can cause the supply of another good using the same resources (containers) to decrease, as suppliers tend to produce more of the higher-profit good. This effect is essentially a reallocation of resources within an industry.