Question

Hello,

I need help on my assignment:

I need to identify and discuss two U.S. firms whose key characteristics align with your specific market structures. Determine the equilibrium point for each of your firm's market structures. One example of the U.S. firms with Perfectly Competitive Market Structure and the other firm and example of Monopolistic Competitive Market Structure.

• State the firms selected.

• Identify the equilibrium point for each market structure assigned.

• Describe your assigned market structures.

Thank you very much!

Answer 1

Firms:

Perfectly competitive: Archer Daniels Midland (ADM), wheat farmer.

Monopolistic competitive: Toyota Motor Corporation (TMC), automobile manufacturer.

Equilibriums: Perfectly competitive market: МС Price ATC E AR (Demand) MR = P Output In this market firms are price taker, therefore, the demand curve becomes horizontal and equal price. Equilibrium is the profit-maximizing stage where price (P) becomes equal (МC); (P 3 МC). It happens profit-maximizing quantity is Q at P price for ADM to marginal point E; therefore, the equilibrium point is E. The corresponding to cost at

Monopolistic competitive market: Price МC P ATC \Demand AR Output MR In this market firms are price setter; therefore, the demand curve is downward slopped Equilibrium is the profit-maximizing stage where marginal (MR) becomes equal to marginal cost

(MC); (MR = MC). It happens at point E; therefore, the equilibrium point is E. The corresponding equilibrium quantity is Q and equilibrium price (that is connected to the demand curve) is P for TMC. The shaded rectangular area is profit of the corporation.

Descriptions:

Perfect competition: this market is very large, because there are so many sellers and buyers. Wheat is the product suitable for perfect competition, since there are so many wheat farmers. Here the price of a product is fixed, based on the market demand and market supply. Both buyers and sellers have to accept that price. Since there are many numbers of firms, a single firm can’t influence on the price. So the firms are price taker.

Monopolistic competition: in this market, goods are differentiated. There are many small sellers. Since the products are similar but not identical, each firm enjoys some monopoly power. Here the demand curve is downward slopping and same as monopoly. But keeping customers at that price is a great challenge, since customers may switch to an alternative because of smaller price.