In equilibrium under monopolistic competition:

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In monopolistic competition, firms have some degree of market power and can set their prices above their marginal costs. However, they still face some competition, so they cannot charge any price they want. As a result, the marginal revenue curve of each firm is downward sloping and lies below its demand curve, leading to MR<P. In equilibrium, firms produce where MR=MC, but this quantity is less than the socially efficient level of output. Therefore, monopolistic competition leads to a deadweight loss and lower social welfare compared to perfect competition. Additionally, whether firms earn profits or suffer losses in the short run depends on the demand conditions and cost structure of each individual firm.

In Equilibrium Under Monopolistic Competition