The most important characteristic of Monopolistic Competition is product differentiation. Without this feature the industries would be perfectly competitive, especially when entry is free.

   Because each individual firm produces a somewhat unique product each firm faces a downward sloping demand curve. Even if a competitor charges a slightly lower price a monopolistically competitive firm won't lose all sales since some will still be willing to pay a little more for that firms somewhat unique product. If a firm lowers prices it won't take all business always from its competitors either, some will still prefer the other "brand." so the demand curves are downward sloping.

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