In a monopolistically competitive market, how does the presence of product differentiation affect consumer surplus compared to a perfectly competitive market?

In a monopolistically competitive market, businesses sell products that are similar but not identical, which is called product differentiation. This means that consumers have more choices and can find products that better match their preferences. As a result, consumers may be willing to pay a higher price for a product they prefer, which can reduce consumer surplus compared to a perfectly competitive market, where products are identical and prices are typically lower. For example, if a consumer prefers one brand of cereal over another, they might pay a little more for that brand, decreasing the overall surplus they gain from buying cereal. In contrast, in a perfectly competitive market, consumers enjoy lower prices and higher consumer surplus because they can easily switch to another seller without losing any value.