maximizing level of output. We will then discuss oligopolistic firms, which face two conflicting temptations: to

collaborate as if they were a single monopoly, or to individually compete to gain profits by expanding output

levels and cutting prices. Oligopolistic markets and firms can also take on elements of monopoly and of perfect

competition.

10.1 Monopolistic Competition

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain the significance of differentiated products

• Describe how a monopolistic competitor chooses price and quantity

• Discuss entry, exit, and efficiency as they pertain to monopolistic competition

• Analyze how advertising can impact monopolistic competition

Monopolistic competition involves many firms competing against each other, but selling products that are

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