Gain to cutting price – more output sold. Cost of cutting prices – lower profit per unit. At the profit-maximizing price, the gain and the loss exactly offset each other. At a price slightly above the profit-maximizing price, the gain is only a little smaller than the loss. Note that it is privately optimal for the firm to cut prices if B–A > cost of changing prices. However, it is socially optimal for the firm to cut prices if B+Y>cost of changing prices.