1. Why do monopolistic competition markets have elastic demand curves?

2. What is non-price competition and how do firms use it in monopolistic competition?

3. How do subtle differences in quality, reputation, or appearance allow multiple firms to coexist in the same market?

1. Why can firms in monopolistic competition raise or lower prices without losing all customers or starting a price war?

1. What is product differentiation and what types of differences do firms emphasize to distinguish themselves?

2. How can advertising focused on broad benefits versus specific differences affect which firms attract customers?

1. How do firms in monopolistic competition maximize profits in the short run, and why can some firms earn positive economic profit?

2. Why does the downward-sloping demand curve in monopolistic competition allow firms to earn short-run profits?

1. Why do firms in monopolistic competition typically earn zero economic profit in the long run?

2. What is excess capacity and how does it result from long-run equilibrium in monopolistic competition?

3. How does the price-to-marginal-cost relationship in long-run monopolistic competition create allocative inefficiency?

1. What percentage of revenue do firms typically spend on advertising in monopolistic competition, and what is the economic concern about this spending?

1. How does excess capacity in monopolistic competition affect total output and resource utilization?

1. Why does the desire for product differentiation in monopolistic competition sometimes discourage innovation by existing firms?

2. What role do new entrants and outsider firms play in introducing major innovations to monopolistic competition markets?

1. How does the profit-maximizing price in monopolistic competition create inefficiency compared to marginal cost?