17.1 What is Monopolistic Competition?

MyEconLab Concept Video

Samsung, HTC, Apple: Which smartphone will you choose? Smartphones are sold in a market that is neither perfect competition nor monopoly. Smartphone producers possess some power to set their prices as monopolies do. But unlike monopoly, they face competition from the entry of new firms as the firms in perfect competition do. We call a market like the one in which smartphone producers operate monopolistic competition.

Describing Monopolistic Competition

Monopolistic competition is a market structure in which

  • A large number of firms compete.

  • Each firm produces a differentiated product.

  • Firms compete on price, quality, and features.

  • Firms advertise.

  • Firms are free to enter and exit. ...

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