result in Imperfect Competition. The table below provides an overview of the characteristics of each of these market structures. Monopolistic competition A situation in which many firms with slightly different products compete. Moreover, firms compete by selling differentiated products that are highly substitutable, but are not perfect substitutes. Therefore, the level of market power under monopolistic competition is contingent on the degree of product differentiation. Monopolistic competition indicates that enterprises will participate in non-price competition. Monopolistic competition leads to low production efficiency, and the economic profit of monopolistic competition company is 0. In the long run, consumers suffer if monopolists' profits are limited, because limiting profits prevents companies from innovating. Monopolistic competition is defined to describe two main characteristics of a market: 1. There are many sellers in the market. Each vendor assumes that a slight change in the price of his product will not affect the overall market price. The belief that competitors will not change their prices just because a vendor in the market changes the price of a product. 2. The sellers in the market all offer non-homogenous products. Companies have some control over the price of their products. Different types of consumers will buy the goods they like according to their subjective judgment. There are two types of product differentiation: Vertical differentiation: a product is unambiguously better or worse than a competing product (e.g. products that differ in efficiency or effectiveness); Customers select a product by using objective measures (e.g., price and quality) to rank their choices from best to worst. and Horizontal differentiation: a product that only some consumers prefer to competing products (e.g. Mercedes Benz and BMW). Customers make subjective choices about what they want to buy, because they have no objective criteria to distinguish the quality of products. Location and taste are important criteria to determine whether they are consumers' special preferences. How much consumers know about alternative cost information (search costs) is another measure of level differentiation. Consumers will not easily switch from a fixed seller unless they are informed of another seller who is more in line with their price expectations. Lower search costs can help low-priced sellers increase their market share. The reason for lower level differentiation may be the lower cost of search, which will lead to lower profits for the company. In addition, when customers have different preferences for goods, other sources of supply are unknown to customers,