Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 5 Firm Behavior and the Organization of Industry
Chapter 16 of 36 - Monopolistic Competition
Section 4 of 15
…
Figure 1 summarizes the four types of market structure.
1-Monopoly – the market when there is only one supplying firm and one product.
2-Oligopoly – the market when there are only a few supplying firms offering a similar product.
3-Monopolistic competition – many firms selling differentiated products
4-Perfect competition – many firms supplying an identical product
…
3-Monopolistic competition, the subject of this chapter
Monopolistic competition markets have these attributes
· many sellers compete for the same group of customers
· each firm produces a product at least slightly different from products of other firms
· each firm has a monopoly over the product it makes
· firms are price makers facing a downward-sloping demand curve
· firms can freely enter or exit the market
· the number of firms in the market adjusts until economic profits are driven to zero
Almost all markets are of the monopolistic competition type.
…
When there are many firms the market is either monopolistic competition or perfect competition.
To distinguish between monopolistic competition or perfect competition we must determine if the firms sell identical or differentiated products.
If the firms sell differentiated products, the market is monopolistic competition.
If the firms sell identical products, such as many produced by agriculture, the market is perfect competition.
…
At times it may be difficult to decide what structure best describes a market.
There is no definite number that separates "few" from "many" when counting the number of firms.
There are about a dozen companies selling cars in the United States, whether this market is an oligopoly or monopolistic competition is subjective.
The distinction between identical and differentiated products is also often difficult, milk is sold with different brand names, in different containers, and in different locations.
….
identical products and differentiated products
dōichi seihin to sabetsuka seihin
同一製品と差別化製品

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