How to read this
A monopolist faces the whole demand curve, its average revenue . Selling one more unit lowers the price on all units, so marginal revenue lies below . The firm produces where and earns the green rectangle ; a price taker facing the same demand would produce more at a lower price (open circle).
A firm with a product of its own is a local monopolist and earns a profit. Rivals then bring out substitutes that take some of its demand, so its shifts down. Press Substitutes enter: in the long run just touches , zero profit, while average cost is still falling.