![]() In many markets, competing firms sell products that can be differentiated from one another. Examples of monopolistically competitive firms include restaurants, retail clothing stores, and gasoline service stations.ĭifferentiated products and monopolistic behavior. This last condition is what distinguishes monopolistic competition from perfect competition. ![]() Third, each firm in the market produces a differentiated product. Second, there is free entry and exit into the market there are no barriers to entry or exit. First, the market has many firms, none of which is large. Three conditions characterize a monopolistically competitive market.
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