Why product differentiation is practiced in monopolistically competitive market
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What a firm achieves by differentiating its product from competitors is to create a market in which it can act as a monopoly, enabling them to have price-making power. ... Nevertheless, product differentiation can also be a way to avoid or to create entry barriers and thus become a source of competitive advantage
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In Monopolistic Competition, a buyer can get a specific type of product only from one producer. In other words, there is product differentiation. The firms have to incur selling expenses since there is product differentiation. There is a large number of sellers with inter-dependent demand and supply conditions.
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