You are the manager of a small Canadian firm that sells cardboard boxes in a perfectly competitive
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Question:
You are the manager of a small Canadian firm that sells cardboard boxes in a perfectly competitive Canadian market (the cardboard boxes you sell are a standardized commodity; stores view your boxes as identical to those available from dozens of other firms).
You are pondering about two events you recently learned about through trade publications:
1) The overall market supply of cardboard boxes will decrease by 3% (for any given price) due to exit by foreign competitors?
2) Due to a growing Canadian economy, the overall market demand for cardboard boxes will increase by 2% (for any given price).
Based on this information, should you plan to increase or decrease production in the short- run? Explain using diagrams.
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