Monopolistic Competition


An industry structure with a relatively few large firms, each with some market power to set prices.

Monopolistic competition falls somewhere in-between perfect competition and monopoly. With perfect competition, all firms are small relative to the size of the market and are price-takers, i.e. they cannot influence the market price. In a monopoly, there is one dominant firm that sets the market price. With monopolistic competition, there are a few firms that have some influence on the price of their product but have to, nonetheless, take into account the prices of the other firms in the industry.
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