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Multi-hop ad hoc networks suffer from the "hidden" and "exposed" node problems which diminish aggregate network throughput. While there are various approaches to mitigating these problems, in this work we focus exclusively on the role of physical carrier sensing (PCS). Specifically, tuning the PCS threshold leads to a trade-off between the hidden and exposed cases; reducing one typically increases the other, implying the existence of an optimal PCS threshold setting maximizes the aggregate network throughput. The contributions of this work are two-fold: i. We develop an analytical model to determine the optimal PCS threshold for a homogeneous network with constant link distances and show that setting the carrier sensing range close to the interference range is a robust close-to-optimal setting for network optimization in many scenarios. As an extension to more pragmatic network topologies with non-uniform link distances, a rate-to-link allocation scheme is proposed based on rendering the interference range equal for all links that allows a single carrier sense range to be used for the whole network, ii. The above suggests the need for on-line adaptation of tunable PCS threshold in general. The proposed algorithm is based on the key concept of loss differentiation (LD), which disambiguates the cause of packet loss event due to link layer interference (hidden terminals) and collisions respectively. Extensive simulation results show that the proposed PCS adaptations make the PCS threshold converge to its optimal value and thus outperform schemes without PCS adaptation.