In the short run, a monopoly firm may make losses as illustrated below.

The monopoly firm is in equilibrium at point B where MC=MR. However, at this equilibrium point,  average cost (AC) is greater than average revenue AR. In other wards, the cost of producing equilibrium out put  Q1 is higher than the price, at which it is sold. Hence, the firm makes losses equal to the shaded area P₁,C,YX.

Long run equilibrium of a monopolist.

In the long, the monopolist can expand his plant or use the existing one provided he maximises his profits. The monopolist would not stay in business if he is incurring losses in  the  long run.

Therefore, in the long run, a monopolist only earns profits but not losses.

Figures 2.36 long run  equilibrium of a monopolistic firm.

The monopolist earns abnormal profits equal to the shaded area CP₁, AC.  He is in equilibrium at point B where MC=MR and the AC is below the AR hence profits.

To keep the price high at P1 so as  to earn the observed profits, the monopolist  produces at excess capacity i.e restricts supply to Q₁. The cost minimising out put (optimum out put) is Qe which is produced at the lowest possible cost (shown by the lowest point of the AC curve) However, the monopolist produces less than the optimum out put (Qe) and therefore supplies only OQ₁.