This chapter introduces the readers to monopolistic competition. After reading this chapter and working on the practice questions, the learners should be able to recognize real-world examples of goods and services that are sold in monopolistically competitive markets, apply the rule for profit maximization to find the optimal output and pricing choice of a firm operating under monopolistic competition, graphically show the profit or the loss a firm makes, describe the process of entry and exit and how it results in the typical firm breaking even in the long run, compare and contrast the economic outcome under monopolistic competition to the perfectly competitive one, and understand the importance of product differentiation and marketing.