Marginal Revenue and Marginal Cost for the HealthPill Monopoly

Each extra unit a monopoly sells brings in the new price but forces every other unit down to that price too, so marginal revenue is below the price and falls steadily. Here it reaches zero at 7 units and is negative beyond that: an eighth unit actually reduces total revenue. Marginal cost falls at first and then rises steeply.

While marginal revenue is above marginal cost, at 4 units it is $600 against $250, another unit adds to profit. Where marginal cost is above marginal revenue, at 6 units it is $850 against $200, cutting back adds to profit. The best output is the last unit whose marginal revenue still covers its marginal cost, which is 5. The slider raises or lowers the demand schedule and the crossing moves with it.