because it must now sell every other unit at a lower price. As the quantity sold becomes higher, at some point

the drop in price is proportionally more than the increase in greater quantity of sales, causing a situation

where more sales bring in less revenue. In other words, marginal revenue is negative.

FIGURE 9.5 Marginal Revenue and Marginal Cost for the HealthPill Monopoly For a monopoly like HealthPill,

marginal revenue decreases as it sells additional units of output. The marginal cost curve is upward-sloping. The

profit-maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to

marginal cost: that is, MR = MC. If the monopoly produces a lower quantity, then MR > MC at those levels of output,

and the firm can make higher profits by expanding output. If the firm produces at a greater quantity, then MC > MR,

and the firm can make higher profits by reducing its quantity of output.

Quantity

Total Revenue

Marginal Revenue
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