Given the perfectly competitive firm is a price taker, price is determined through the interaction of supply and demand in the market. Markets always move toward equilibrium, so the market-determined price ultimately is the price that makes quantity demanded equal to quantity supplied.
The market demand curve for the good you produce is
![image0.jpg](https://www.dummies.com/wp-content/uploads/373352.image0.jpg)
where Qd is the market quantity demanded and P is the market price in dollars.
The market supply curve is
![image1.jpg](https://www.dummies.com/wp-content/uploads/373353.image1.jpg)
where Qs is the market quantity supplied and P is the market price in dollars.
In order to determine the equilibrium price, you take the following steps:
Set quantity demanded equal to quantity supplied.
Combine similar terms.
Divide both sides of the equation by 35,000 to solve for P.
Thus the market-determined equilibrium price is $80.00. This is the price your firm must charge in a perfectly competitive market.
If you charge $80.01, nobody will buy your product because they can purchase it from any one of a large number of other firms for $80.00. And you don’t want to charge $79.99, because you can sell everything you produce for $80.00. You have no need to settle for a penny less.