Question about perfect competition

Reference no: EM1369733

Suppose You are a manager of a small US firm that sells nails in a competitive market (the nails are a standardized commodity; stores view your nails as identical to those available from hundreds of other firms). You are concerned about two events you recently about through trade publications:

(1) The overall market supply of nails will decrease by 2%, due to exit by foreign competitors
(2) Due to a growing US economy, the overall market demand for nails will increase by 2%

Based on this information, should you plan to increase or decrease your production of nails. Explain.

Reference no: EM1369733

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