[MUSIC] Let's think through a graphical interpretation of this marginal revenue. We know what revenue is, it's price times quantity so if the price is $100 and we're selling 50 units, the revenue is this rectangle here. If the monopoly wants to sell an additional unit, we said they had to lower the price to $99. And what's important to realize is that they're lowering the price not just to the last unit, but to all the units. So they're lowering the price to everyone down to $99. So the new revenue is this new price, 99, times this new quantity, 51. So if we want to compare these two rectangles, what is the difference between them? On the one hand by selling an additional unit, the monopolist gains something. They gain this rectangle here. This is the addition from selling the extra unit. But on the other hand they also lose something. What do they lose? They lose the fact that they had to lower the price on each of the existing units. So what is our marginal revenue? Our marginal revenue is the difference between what they gained and the fact that they had to give a discount on all the previous units. Let's calculate these areas. What they gained is the fact that they're selling 1 unit at the going price of $99. So this rectangle is equal to $99. On the other hand, there's the discount on all the previous units. A discount of $1 times all the previous units which is 50, and once again, we get that the marginal revenue is equal to $49. And clearly it has to be less than the price because this rectangle, this is the price of $99. And the marginal revenue is this price minus this rectangle. So again, marginal revenue is less than the price.