In monopolistic competition, a firm has a limited degree of "price-making" ability. This means that the profit-maximizing firm will

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In monopolistic competition, firms have some degree of market power and can differentiate their product from competitors. This allows them to set prices above marginal cost in order to maximize their profits. However, they still face competition from other firms in the market, so their ability to set prices is limited. Thus, the profit-maximizing firm in monopolistic competition will set price above marginal cost, but not too high as to drive away customers.

In Monopolistic Competition, a Firm Has a Limited Degree of "Price-Making