Following are the main features of Monopolistic Competition:

(a) Existence of a Large Number of Firms : An important feature of monopolistic competition is that there is a large number of firms in the market, each firm accounting for very little share in the overall production of the industry. Companies are small- sized and they are found in large numbers. This type of situation is found in those branches of production in which scale economy is limited with a little bit of capital investment and simple techniques of production.

(b) Product Differentiation: A distinct feature of monopolistic competition is product differentiation Though the number of firms is large, but their products differ from one another in colour, shape, brand , quality, durability, etc. These products are close substitutes. 

Examples- Soaps like Pears, Dove, Patanjali, etc., Pens like Reynolds, Parker, etc.

(c) Freedom of Entry and Exit of Firms: This is another important feature of monopolistic competition. It is easy for new firms to enter and existing firms to leave in monopolistic competition. Free entrance means that when the existing firms in the industry are earning economic benefits, then new entities enter the industry which help in the expansion of production.

As a result, the price of the product decreases in the long term. However, it should be noted that under monopoly competition, entry cannot be as easy or independent as compared to products with perfect competition. But under monopolistic competition, the new firm can only produce new brands or product varieties, due to which it may be difficult to compete in the beginning with already well-established brands and product varieties.

(d) Some Influence over the Price: Each firm under monopolistic competition produces a product variety which is a close substitute of others. Therefore, if a firm lowers the price of its product variety, some customers of other product varieties will switch over to him. This means that as the the price of its product lowers, its quantity demanded will increase. On the other hand, if he raises the price of its product, some of his customers will leave him and buy similar products from his competing firms.

This implies that demand curve facing a firm working under monopolistic competition slopes downward and marginal revenue curve lies below it. This means that under monopolistic competition, an individual firm is not a price taker but will have some influence over the price of its product. If the producer fixes a higher price, he will be able to sell a relatively smaller quantity of output. And if the producer fixes a lower price, he will be able to sell more. Thus, under monopolistic competition, a firm has to choose a price-output combination which will maximize its profit.

(e) Non-price.Competition : An important feature of monopolistic competition is non-price competition, through which companies try to win customers in the market. Competitive rivals use various strategies, like the guarantee of repair, after sales service, gift plans, etc.

(f) Less Mobility : Under monopolistic competition, both the goods and services are not fully mobile as it is in perfect competition.

(g) More Elastic Demand : Under monopolistic competition, demand curve is more elastic than in a pure monopoly. In order to sell more, the firm must reduce its price.

(h) Selling Costs Selling costs constitute a substantial part of the total cost under imperfect or monopolistic competition: Selling costs refer to those costs which are incurred by the firms for promoting their sales. These are incurred on advertisements, salesmanship, etc.

(i) Imperfect Knowledge Buyers and sellers lack the right knowledge about the price of the product: Because it is not possible to compare the products of different companies due to product discrimination, buyers prefer a particular brand from among a wide range of products differentiated by special firms.