ba736

Agree with dtrynoski.
Technically, there are 2 points to be understood:
1. Whenvever, the equilibrium price as determined by firms’s supply curve and demand curve for its product is
a) Above the firm’s ATC (Average Total Cost), it will earn Economic Profits (Supernormal Profit)
b) Is equal to its ATC, it will earn Normal Profits (No Economic Profits)
c) Is less than ATC but above AVC, firm will be taking losses but will continue to operate in short term on the principal of minimization of losses. In this case, firm is able to recover all of its Fixed Costs and part of its Variable Costs. So, it will continue to operate in short run in the hope that prices will increase in future upto or above its ATC.
d) Is less than its AFC, firm will seaze operations even in short run, as by running its operations, it is not even able to recover its fixed costs.
2. In monopolistic competition as new firms enter the market, each with thier own differentiated product, they eat into the market share of existing firms. Thus the demand for products from other firms is reduced and the Demand Curve for product of other firms shift to left, thus decreasing their equilibrium price.
Hope this helps.