Short-Run Equilibrium under Monopolistic Competition:

Equilibrium follows the same rule as in perfect competition and monopoly.  That is, to maximize its profits, the monopolistic competitive firm will adjust its rage of production to the point where MC is equal to MR.  Similarly, the firm will be shut down completely in the short-run to minimize its losses, if it is unable to cover all of its variable cost of production at any positive rate of output.

Figure above  shows  that,  in  the  short-run,  the  firm  is  earning  supernormal  profits represented by the shaded rectangle P1ABC by charging price P1 and producing output Q1.