Monopolistically competitive markets are very common in the United States. Retail gasoline, hair stylists, auto repair facilities, fast food restaurants, and bars all fall into this type of market structure.

a. What are the basic characteristics of monopolistic competition? List and explain the three most important characteristics.

b. How can the firm in monopolistic competition attract customers to its business? Identify and briefly explain 3 forms of non-price competition.

c. The typical firm in a monopolistically competitive market does not earn long-run economic profit. Does that fact make it productively efficient? Explain why the firm will not able to earn long-run economic profit.