Which market structure is characterized by many companies selling similar but not identical products?

The market structure characterized by many companies selling similar but not identical products is known as monopolistic competition. In this type of market, each firm has some degree of market power, allowing them to differentiate their products from those of competitors. This differentiation can be based on quality, branding, features, or customer service, which enables firms to compete on factors other than just price.

Firms in monopolistic competition often focus on marketing and advertising to create a perception of uniqueness in their products, which attracts customers. This structure also leads to a situation where, although many firms exist, each one has a small share of the overall market, and consumers have a variety of choices.

In contrast, perfect competition features many firms selling identical products with no market power for any individual firm. An oligopoly consists of a few firms that exert significant market power and can influence prices, often resulting in limited competition. A monopoly, on the other hand, is when a single firm dominates the entire market, leaving no room for competition. This context highlights why monopolistic competition is the correct answer, as it uniquely embodies the characteristics of many companies offering similar yet distinct products.