If the firm produces more than Q*, say QO (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 QO 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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