In a perfectly competitive market, if a firm's marginal cost exceeds its marginal revenue, it is still able to maximize profit by reducing its output level.

In a perfectly competitive market, firms aim to maximize their profits by comparing marginal cost and marginal revenue. Marginal cost is the cost of producing one more unit of a product, while marginal revenue is the income from selling that additional unit. If a firm's marginal cost is greater than its marginal revenue, it means that producing more units is costing the firm more than it is earning from those units. By reducing output, the firm can align its marginal cost with its marginal revenue, which helps to maximize profit. For example, if a bakery finds that making one more loaf of bread costs $3 but sells for only $2, it should produce fewer loaves to improve its overall profit.