In the short-run, a monopolistic competitive firm’s equilibrium is established at the level of output where its MC= MR, and MC is rising at this level of output.
Short period equilibrium does not mean the same price for all firms. Uniformity in prices cannot be expected because the products of various firms are not identical. Cost of production of firms also varies. Normally average cost (AC) of large firms is less whereas it is high for small-sized firms. Therefore, supernormal profits are likely for some firms. Normal profits for some others and loss to remaining firms would accrue.
Thus, a monopolistic competitive firm, in the short run, may:
(a) Earn super normal profits, i.e., AR > AC
(b) Earn normal profis, i.e., AR = AC
(c) Incur losses, i.e., AR < AC.
