Suppose a firm can sell 25 luxury boxes at $1,000,000 per box.In order to sell one more luxury box, it must lower its price to $950,000 per box and sell all 26 boxes at this new lower price.

1. What will happen to this firm's revenue if it sells that extra box? Does it seem like a good idea?
2. What is the relationship between the price the good is sold for and the firm's marginal revenue?
3. Can you explain your result in part 2? Why is the price setter different than the price taker?