A monopolistic firm is a price taker, it faces a downward-sloping demand curve.
If a monopolistic competitive firm is operating in the short run at an optimal level and earning negative economic profits, it means that the price is not able to cover the average total costs.
If the firm is at the optimal level, the price must be equal to marginal revenue and marginal cost. But the price is not covering costs, so the firm is incurring losses.
The solution and complete explanation for the above question and mentioned conditions is given below in the attached document.i hope my explanation will help you in understanding this particular question.
