Question

You are the manager of a small U.S. firm that sells nails in a competitive U.S. market (the nails you sell 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 learned about through trade publications: (1) the overall market supply of nails will decrease by 2 percent, due to exit by foreign competitors; and (2) due to a growing U.S. economy, the overall market demand for nails will increase by 2 percent.Based on this information, should you plan to increase or decrease your production of nails

Answer 1

Answer:

On the basis of given information, I'll increase my production of nails.

Explanation:

The reason for increase in production of nails are as follow:

1. The fact that overall market supply of nails will decrease by 2 % due to exit by the foreign competitors that means my competition will decrease and it will increase the market share for me.
2. The fact that the overall demand of nails will increase by 2 % means that now I can increase my production in order to meet the supply and demand gap.

These two facts show that it is good opportunity to increase the production as the demand has increased and competition has decreased.