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Monopolistic competition markets typically try to differentiate their products in order to achieve above market returns. These markets ensure that its products are imperfect substitutes for each other. As a result, a business that works on its branding can increase its prices without risking its consumer base. This helps these firm survive and make profits. In the long run, companies in monopolistic competition still produce at a level where marginal cost and marginal revenue are equal. However, this means the demand curve will have shifted to the left due to other companies entering the market. As for perfect competition markets, the availability of free and equal information ensures these markets can produce its good or services at exactly the same rate and with the same production techniques as another one in the market. In the long run, profits and losses are eliminated because an infinite number of firms are producing infinitely-divisible, homogeneous products.
Boyle, M. J. (2021, December 12). What is monopolistic competition? Investopedia. Retrieved January 17, 2022, from https://www.investopedia.com/terms/m/monopolisticmarket.asp#:~:text=Monopolistic%20competition%20characterizes%20an%20industry,affect%20those%20of%20its%20competitors (Links to an external site.).
