A profit-maximizing firm in monopolistic competition differs from a profit-maximizing firm in perfect competition because the firm in monopolistic competition

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A firm in monopolistic competition faces a downward-sloping demand curve because it has differentiated its product in some way, giving consumers a reason to choose its product over competitors. In contrast, a perfectly competitive firm faces a perfectly elastic demand curve at the market price. Monopolistically competitive firms also may face some barriers to entry, such as brand loyalty, but not as significant as those faced by a monopoly. In the long run, monopolistically competitive firms can earn zero economic profits as entry or product differentiation erodes their market power.

A Profit-Maximizing Firm in Monopolistic Competition Differs from a Profit-Maximizing