Following are the main features of monopolistic competition : 

(i) Limited number of sellers – The number of sellers is so limited that each individual seller can influence the market in a limited way. 

(ii) Firms producing differentiated products – In monopolistic competition, firms produce differ-entiated products. The products are similar but not identical. Products are differentiated by brand name, colour, package, credit conditions, customer service etc. The products may physically be the same but consumers treat them different products. This gives an individual firm some monopoly of its own differentiated product. 

(iii) Free entry and exit – Buyers and sellers (firms) are free to enter or leave the market at any time they like. Large profit will induce the new firms to enter the industry whereas losses will compel inefficient firms to leave the industry. The characteristic of differentiated products separates monopolistic competition from perfect competition. Under perfect competition, firms sell homogeneous products which are identical in size, colour, quality and weight. As such, products sold by the firms under perfect competition are perfect substitutes of one another.