Which market structure involves many firms competing with differentiated products?

The market structure that involves many firms competing with differentiated products is characterized by the nature of competition where each firm offers products that are similar but not identical. This allows firms to have some degree of market power, as consumers may prefer one brand over another due to perceived differences in quality, features, or branding.

In monopolistic competition, firms compete by focusing on non-price competition strategies, such as marketing, product differentiation, and customer service. This results in a variety of choices for consumers, leading to a wider range of products that cater to differing preferences.

The presence of many firms means that while one firm's product may stand out due to its unique features, the overall market remains competitive. Firms are still motivated to innovate and improve their offerings to attract customers, which also drives quality and variety in the marketplace.

In contrast, other structures like monopoly involve a single firm dominating the market with no close substitutes, while oligopoly consists of a few firms that may offer similar products and potentially collude. Pure competition, on the other hand, features many firms selling identical products with no differentiation, making it less applicable to this question regarding many competing firms with differentiated offerings.