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    Production decisions given changes in demand and supply.

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

    1) The overall market supply of hammers decreased by 2 percent, due to the exit by foreign competitors,
    2) Due to a growing U.S. economy, the overall market demand for hammers will increase by 2 percent.

    Based on this information, should you plan to increase or decrease your production of nails? Explain. (Directions: use the graphical presentation of the changes in the market for hammers and the impact of these changes on your firm's output)

    Please somehow attach a graphical representation with the solution - perhaps in Excel? Thank you in advance for your help.

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    https://brainmass.com/economics/general-equilibrium/production-decisions-given-changes-in-demand-and-supply-230763

    Solution Preview

    Please see attached file for fully formatted explanation with graphs.
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    Given that your firm is one of many producing identical goods your market is likely characterized as perfectly ...

    Solution Summary

    The following solution outlines how a firm makes production decisions to maximize profit by setting MR=MC. Given expected changes in demand and supply, I demonstrate how the firms output will be affected.

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