In a monopolistically competitive industry, each producer has a product that consumers view as somewhat distinct from the products of competing firms; at the same time, though, consumers see these competing products as close substitutes. If Leo’s food court contained 15 vendors selling exactly the same kind and quality of food, there would be perfect competition: any seller who tried to charge a higher price would have no customers. But suppose that Wonderful Wok is the only Chinese food vendor, Bodacious Burgers is the only hamburger stand, and so on. The result of this differentiation is that each seller has some ability to set his own price: each producer has some—