A market where each firm faces a downward sloping demand curve and acts as a monopoly in setting price. However, there are many firms selling differentiated versions of the same product and many potential entrants. If monopoly profit is earned new firms will enter the market. This causes the demand curve of each firm to shift downward and profit to fall. Entry will cease when all monopoly profit is eliminated. In equilibrium all firms will price above marginal cost but earn only normal profit. Models of monopolistic competition are frequently used when the number of firms in an industry is the issue of interest.