As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

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This is because, initially, the increase in quantity sold due to the price decrease can more than offset the lower price, raising total revenue. However, beyond a certain point, further price decreases lead to a smaller increase in quantity sold that does not compensate for the lower price, causing total revenue to decrease.

As a Monopolist Lowers the Price of Its Product from a High