# Why is ATC tangent to Demand in a Monopolistic or Mopolistically Competitive Firm Making Zero Profit?

I understand that the Average Total Cost is equivalent to demand in a zero profiting monopoly or monopolistically competitive firm in order for there to be zero profits (when ATC = P at a given quantity), but why is ATC tangent to demand instead of intersecting demand at a point when ATC is downward sloping?

See:

1. If there is a point at which this is positive, then this is equivalent to a point at which average total cost is below the demand curve, for example slightly to the right of $Q^*$ in your second diagram. At this point the firm will be making a profit, contrary to your assumption of zero profit. So your second diagram does not illustrate the zero-profit case