sell one additional unit at the new market price. Second, all the previous units, which we sold at the higher price,

now sell for less. Because of the lower price on all units sold, the marginal revenue of selling a unit is less than the

price of that unit—and the marginal revenue curve is below the demand curve. Tip: For a straight-line demand curve,

MR and demand have the same vertical intercept. As output increases, marginal revenue decreases twice as fast as

demand, so that the horizontal intercept of MR is halfway to the horizontal intercept of demand. You can see this in

the Figure 9.8.
230 9 • Monopoly

FIGURE 9.8 The Monopolist’s Marginal Revenue Curve versus Demand Curve Because the market demand curve is

conditional, the marginal revenue curve for a monopolist lies beneath the demand curve.

The Inefficiency of Monopoly

Most people criticize monopolies because they charge too high a price, but what economists object to is that
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