If the firm produces more than Q*, say Q^O (over produce) as shown to the right, it will incur losses on the additional units above Q*.

    For output greater than Q*, MR < MC. This means that the additional cost of each unit produced is greater than the added revenue it generates. It wouldn't make sense to produce output that costs $70 per unit and sell it for $55 per unit, and this would be what this firm is doing. If it produced Q^O units of output it would reduce profits by an amount equal to the yellow shaded area on the graph. So, anything greater than Q* isn't profit maximizing.

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