A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

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A firm in a monopolistically competitive market faces a downward-sloping demand curve for its product because the firm's product is differentiated from those of its competitors, making it less substitutable. As a result, the firm has some market power and can charge a price above marginal cost. However, the firm cannot charge a price too far above marginal cost, as there are still some close substitutes available in the market. Therefore, the firm must find the optimal price and quantity combination that maximizes profit given the demand and cost conditions it faces.

A Profit-Maximizing Firm in a Monopolistically Competitive Market Differs from a Firm