The marginal rule identifies the best output

Produce a unit when it adds more revenue than cost.

If MR>MC, the next unit increases profit. If MC>MR, it reduces profit. Choose the last discrete unit for which MR≥ MC, or the intersection where rising MC crosses MR. The rule applies to every market structure. What changes is the firm’s MR curve.

Profit changes by MR-MC when output changes by one unit. A positive difference adds to profit. A negative difference subtracts. Total revenue can still rise when MR<MC, but total cost rises by more, so the unit is not worthwhile. The firm seeks maximum profit, not maximum revenue or maximum output.

For a discrete schedule, list marginal profit. If successive units have MR of $30, $26, $22, and $18 and MC of $12, $17, $23, and $29, the first two units add $18 and $9. The third loses $1 at the margin, so output stops at two. Exact equality is not required.

At the chosen quantity, profit is TR-TC or (P-ATC)Q. If price is below ATC, the firm has a loss, but the output can still minimize that loss in the short run. Equality of MR and MC says nothing by itself about the height of price relative to ATC.

The graph reading has three stages. Use MR and MC to locate Q^*. Move to demand or market price to find P. Read ATC at Q^* and multiply the price-cost gap by quantity. MC chooses the last unit. ATC summarizes all units for profit measurement.

Quantity first, profit second

A firm produces 40 units where MR=MC=$18. Demand shows a price of $24 and ATC is $20. Profit is (24-20)40=$160. The $18 marginal values select quantity. They are not used as the product price.

If ATC were $27 instead, the same output could remain best while the firm lost (24-27)40=-$120. A fixed-cost increase can create this pattern: ATC rises while MC, demand, output, and price remain unchanged. Profit status and output choice are related but not identical.

MC should be rising at the usual smooth profit maximum. An earlier intersection where falling MC meets MR can mark a minimum. For competition MR=P. For monopoly MR lies below demand. The marginal rule is universal, but the MR curve changes with structure.

If totals rather than marginal values are supplied, compute TR-TC at every feasible quantity or derive MR and MC from neighboring rows. Both methods must select the same maximum. An output that maximizes total revenue can be rejected when its added cost exceeds its added revenue, even if revenue has not yet fallen.

At a discrete equality, the last unit adds zero profit. Adjacent quantities may tie unless the stem supplies a convention or an indivisibility. Most exam items avoid a consequential tie, but exact totals settle it. Do not force an additional unit merely because smooth graphs use an equality symbol.