The monopolistic competition model assumes that

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Monopolistic competition assumes that firms will engage in nonprice competition, such as advertising and product differentiation, in order to distinguish their products from those of their competitors. This competition ultimately leads to a less efficient market structure than perfect competition, as firms are able to exercise some degree of market power and the market is not allocatively efficient in the long run. However, firms may still achieve some level of productive efficiency by producing at minimum average total cost in the long run. Economic profits are possible in the short run but will be eroded by entry in the long run.

The Monopolistic Competition Model Assumes That