Short‐run profit maximization. A firm maximizes its
profits by choosing to supply the level of output where its marginal
revenue equals its marginal cost. When marginal revenue exceeds marginal
cost, the firm can earn greater profits by increasing its output. When
marginal revenue is below marginal cost, the firm is losing money, and
consequently, it must reduce its output. Profits are therefore maximized
when the firm chooses the level of output where its marginal revenue
equals its marginal cost.