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In a monopolistic competition it is easy for new firms to enter into an existing firm or to leave the
industry. Lured by the profit of the existing firms new firms enter the industry which leads to the
expansion of output. But there exists a difference.
Under perfect competition the new firms produce identical products, but under monopolistic
competition, the new firms produce only new brands of product with certain product variation. In such a
law the initial product faces competition from the existing well- established brands of product.