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Marginal Revenue and the Demand Curve


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The Marginal Revenue Curve versus the Demand Curve
Marginal Revenue and the Demand Curve
Graphically, the marginal revenue curve is always below the demand curve when the demand curve is downward sloping, since when a producer has to lower his price in order to sell more of an item, marginal revenue is less than price.

In the case of straight-line demand curves, it turns out that the marginal revenue curve has the same intercept on the P axis as the demand curve but it twice as steep, as illustrated in the diagram above.

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