Total Revenue and Total Cost for the HealthPill Monopoly

HealthPill must cut its price to sell more, so total revenue is not a straight line. It climbs while the extra units outweigh the lower price, flattens near 6 or 7 units where the two effects cancel, then falls. Total cost climbs throughout and grows steeper as output rises.

Profit at any output is the vertical gap between the two curves. It is largest somewhere in the middle, not where revenue is highest: the revenue-maximizing output of 6 or 7 costs far more to produce than 5. The marginal approach in the next figure pins the best output down exactly. The slider raises or lowers the whole demand schedule, which lifts or drops the revenue hill.