In a monopolistically competitive market, how do firms typically set their prices?

In a monopolistically competitive market, firms set their prices based on both their costs and the demand for their unique products. Each firm offers a product that is slightly different from others, which gives them some control over their pricing. They look at how much customers are willing to pay and adjust their prices accordingly, often trying to maximize their profits while still attracting buyers. For example, if a local coffee shop sells a special blend that no other shop has, it might charge a higher price than a regular coffee shop because customers find it unique and desirable. However, if the price is too high, customers might choose a different coffee shop, so finding the right balance is essential.