MU_X / P_XY / P_Y

or .

and

_X/P_Y

The

.

< P. This is why firms with market power produce less and charge higher prices than competitive firms.

< MC, producing one more unit adds more to cost than to revenue, so profit decreases and the firm should reduce output. Only when MR = MC is profit maximized; at this point, the firm has no incentive to change output. This rule applies universally, whether the firm is a competitive wheat farmer in Punjab, a monopolistic software company in Bangalore, or an oligopolistic steel producer in Odisha.

and