Market Price & Quantity
Selected firms
The two types of firms include monopolistic and perfectly competitive firms. For the first type of firm, the selected organization is the Toyota Car Company, which is involved in Toyota cars’ production and sales. For the second type of firm, the corporation chosen is Archer Daniels Midland, an organization engaged in purchasing, storing, cleaning, and transporting agricultural produce.
Equilibrium points
Perfectly competitive
For this type of equilibrium, organizations are price takers. As a result, a horizontal curve is obtained. It will be the marginal costs are equal to the price (MC=CP). Besides, it is a type of market where there are several sellers and buyers. The generation of revenue by firms is perfectly competitive. Similarly, consumers are knowledgeable about the products offered by the company. The equilibrium point is at E.
Monopolistic
For this type of equilibrium, organizations are price setters. Thus, there is a downward, slopping curve. The maximum profit is obtained at the point where marginal costs (MC) is equal to MR. It occurs at the equilibrium point, E.
Description of the market structures
Perfectly competitive
It is a significant market because there are various sellers/buyers. As an example, wheat is a perfect product that can be sold by the company because there are multiple sellers of the farm produce and buyers in the market. The demand for the wheat product will be determining the price. As such, there will be a fixed price where farmers and customers will have to accept it. Due to various farmers’ existence, it is difficult for a single company to set the wheat price; hence, they become price takers (Lee & Kyle, 2018).
Monopolistic competitive
There is a differentiation of goods in monopolistic competition. The firms can be able to enjoy a monopoly even though there are various sellers in the market. It is because the sellers produce similar but unidentical products. There is a sloping downward curve. The customer can easily switch to other products, and thus, it is challenging to keep them at that price (Kumar & Chatterjee, 2015).
References
Kumar, S., & Chatterjee, A. K. (2015). A profit-maximizing product line optimization model under monopolistic competition. International Journal of Production Research, 53(5), 1584-1595.
Lee, J., & Kyle, A. S. (2018). When Are Financial Markets Perfectly Competitive?.