Monopolistic competition is a market structure that combines monopoly and competitive market elements. A monopolistic competitive market has freedom of entry and exit, but firms can differentiate their products. Therefore, they have an inelastic demand curve to set prices. However, because there is freedom of entry, supernormal profits will encourage more firms to enter the market, leading to regular earnings in the long term. One example of monopolistic competition is fast foods like Mcdonald's or Burger King. The fast-food chains compete on the quality of food as much as price. Product differentiation is a crucial element of the business. There are relatively low barriers to entry in setting up a new restaurant. Both companies also distinguish their goods from others by making their product physically different in style from their competitors. McDonald’s’ iconic ‘Big Mac’ compared to Burger King's ‘Whopper,’ both are similar to each other in so far as they’re burgers but differ in their contents. Each is easily recognizable from the other and is associated with the fast-food chain that produces it. Each firm continues to push its international presence, although with mixed results. One reason is culture. Many Europeans, for instance, consider fast food to be a quintessentially American tradition. Food menus for Burger King and McDonald's sometimes struggle to appeal to foreign consumers, leaving international markets underdeveloped, particularly in the Asia-Pacific region. The fast-food market is quite competitive, yet each firm has a monopoly on its product. Some customers prefer McDonald’s over Burger King or other brands. These preferences give monopolistically competitive firms market power, which they can exploit to earn positive economic profits.
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