If all firms in an economy are in monopolistic competition with constant elasticity of substitution, can they profit-maximize at $MC=MR=AC$?
The long-run picture for a firm in monopolistically competitive industry should look like this:



The level of production is pinned down by where MR=MC. Price will be equal to AC at that point, so the firm has zero profits.

If the firm was producing at the point where MC=AC, it would have positive profits, which would encourage entry into the industry, shifting the demand in and reducing profits to zero.