All profit-maximizing firms, including monopolies, use a two-step analysis to determine the output level that maximizes their profit (Chapter 7). First, the firm determines the output, Q*, at which it makes the highest possible profit (or minimizes its loss). Second, the firm decides whether to produce Q* or shut down. Profit-Maximizing Output. In Chapter 7, we saw that profit is maximized where marginal profit equals zero. Equivalently, because marginal profit equals marginal revenue minus marginal cost (Chapter 7), marginal profit is zero where marginal revenue equals marginal cost. To illustrate how a monopoly chooses its output to maximize its profit, we use the same linear demand and marginal revenue curves as above and add a linear marginal cost curve in panel a of Figure 9.3. Panel b shows the corresponding profit curve.