Test students' ability to analyze how variations in price elasticity of demand affect a firm's optimal price and output in monopolistic competition. Scope: derive the price–output condition from marginal revenue and marginal cost, use the Lerner index to relate elasticity to markup, perform comparative statics for more‑ or less‑elastic demand (diagrammatic and simple numerical), compare short‑run profit‑maximizing choices with long‑run entry adjustments, and evaluate implications for firm profits, consumer surplus, and market efficiency.