For monopolistic firms, the optimal profit occurs at the point where the marginal revenue is equal to the marginal cost (MR = MC).

For a perfectly competitive firm, the optimal profit occurs at the point where the market price is equal to the marginal cost (P = MC).

Competitive firms produce a quantity that is Pareto efficient since the market price is equal to their marginal costs. However, the marginal revenue for a monopolistic firm lies below the demand curve, indicating that the price charged by the firm is greater than its marginal cost. Thus, a monopoly produces a quantity that is less than the Pareto efficient level of output and charges a higher price than the competitive firm.