distinctive in some way. Examples include stores that sell different styles of clothing; restaurants or grocery

stores that sell a variety of food; and even products like golf balls or beer that may be at least somewhat similar

but differ in public perception because of advertising and brand names. There are over 600,000 restaurants in

the United States. When products are distinctive, each firm has a mini-monopoly on its particular style or

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10.1 • Monopolistic Competition 239

flavor or brand name. However, firms producing such products must also compete with other styles and flavors

and brand names. The term “monopolistic competition” captures this mixture of mini-monopoly and tough

competition, and the following Clear It Up feature introduces its derivation.

CLEAR IT UP

Who invented the theory of imperfect competition?
Two economists independently but simultaneously developed the theory of imperfect competition in 1933. The first
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