Equal to marginal cost. You can tell that profits are as large as possible at q* by simply asking what would happen if the firm produced either slightly more or slightly less. For any q less than q , price (P*) exceeds marginal cost. Hence, an expansion in output would yield more in extra revenues than in extra costs-profits would rise by moving toward q*. similarly, if the firm opted for q>q*, now marginal cost would exceed P* . cutting back on output would save more in costs than would be lost in sales revenue. Again, profits would rise by moving toward toward q*.