In a monopolistically competitive market, what does it indicate if a firm's price is below its average total cost?

In a monopolistically competitive market, if a firm's price is below its average total cost, it means that the firm is not making enough money to cover all its expenses. Average total cost includes both fixed costs, like rent, and variable costs, like materials. When a firm’s price is lower than this average, it is losing money on each product sold. For example, if a firm sells a product for $10 but its average total cost is $12, it loses $2 for every item sold. This situation can lead the firm to reconsider its pricing strategy or even exit the market if losses continue.