1. What is Marginal Revenue?

Marginal Revenue (MR) is the additional revenue generated from selling one more unit of a product or service. It is a key concept in microeconomics that helps businesses determine optimal production levels and pricing strategies.

2. How Does the Calculator Work?

The calculator uses the Marginal Revenue formula:

Where:

• \( MR \) — Marginal Revenue ($ per unit)
• \( \Delta TR \) — Change in Total Revenue ($)
• \( \Delta Q \) — Change in Quantity (units)

Explanation: The formula calculates the rate of change in total revenue with respect to the change in quantity sold.

3. Importance of Marginal Revenue Calculation

Details: Marginal Revenue is crucial for profit maximization. Businesses use MR to determine the optimal output level where Marginal Revenue equals Marginal Cost (MR = MC), which maximizes profits.

4. Using the Calculator

Tips: Enter the change in total revenue in dollars and the change in quantity in units. Both values must be positive (ΔTR ≥ 0, ΔQ > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the relationship between Marginal Revenue and price?
A: In perfect competition, Marginal Revenue equals price. In imperfect competition, Marginal Revenue is less than price due to the downward-sloping demand curve.

Q2: Why does Marginal Revenue decrease as quantity increases?
A: In most market structures, to sell more units, a firm must lower the price, which reduces the revenue gained from each additional unit sold.

Q3: How is Marginal Revenue used in pricing decisions?
A: Businesses set prices where Marginal Revenue equals Marginal Cost to maximize profits. If MR > MC, producing more increases profit; if MR < MC, producing less increases profit.

Q4: Can Marginal Revenue be negative?
A: Yes, when the price reduction needed to sell additional units causes total revenue to decrease, making the additional revenue from the last unit negative.

Q5: What's the difference between Average Revenue and Marginal Revenue?
A: Average Revenue is total revenue divided by quantity (equivalent to price), while Marginal Revenue is the change in total revenue from selling one more unit.