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

(i) the overall market supply of nails will decrease by 2 percent due to the exit by foreign competitors, and

(ii) 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 in the

short run? Please explain.

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