Monopolistically competitive firms offer consumers more variety than perfectly competitive firms.

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Monopolistically competitive firms differentiate their products to appeal to consumers with different preferences, offering more variety than perfectly competitive firms that produce homogeneous products. This differentiation is possible due to the relatively low barriers to entry and exit in monopolistically competitive markets, allowing firms to differentiate themselves from their competitors through product design, quality, packaging, advertising, or other means. However, this differentiation also implies some degree of market power, as each firm faces a downward-sloping demand curve for its product, unlike in perfectly competitive markets where firms face a horizontal demand curve.

Monopolistically Competitive Firms Offer Consumers More Variety Than Perfectly Competitive