Three features of monopolistic competition are as follows:
(i) Large number of buyers and sellers As under perfect competition, in this form also, there are a large number of buyers and sellers. Also, the size of each firm is small. Each firm has a limited share of the market.
(ii) Product differentiation It is a distinct feature of monopolistic competition. A product is often differentiated by way of trademarks and brand
. names. The differentiated products are close substitutes of each other, like Colgate and closeup toothpaste. Because of product differentiation, each firm can decide its price policy independently, so that each firm has a partial control over price of its product.
(iii) Selling cost Each firm has to incur selling costs (expenditure on advertisement, etc) to promote its sales. This is because there are a large number of close substitutes available in the market.