Section 1
Monopolistic Competition
By Boundless
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another.
![Thumbnail](../../../../../../figures.boundless-cdn.com/10550/square/kool-aid-man.jpeg)
Product differentiation is the process of distinguishing a product or service from others to make it more attractive to a target market.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20826/raw/monopoly-surpluses.jpg)
The demand curve in a monopolistic competitive market slopes downward, which has several important implications for firms in this market.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20455/square/r-monopolistic-competition.jpeg)
Monopolistic competitive markets can lead to significant profits in the short-run, but are inefficient.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20456/square/r-monopolistic-competition.jpeg)
In the long run, firms in monopolistic competitive markets are highly inefficient and can only break even.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20534/square/elasticity-elastic.jpg)
The key difference between perfectly competitive markets and monopolistically competitive ones is efficiency.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20479/raw/monopoly-surpluses.jpg)
Monopolistic competitive markets are never efficient in any economic sense of the term.
Advertising and branding help firms in monopolistic competitive markets differentiate their products from those of their competitors.