Marginal Revenue Equals What

A competitive firm s marginal revenue always equals its average revenue and price.

Marginal revenue equals what. To calculate total revenue we start by solving the demand curve for price rather than quantity this formulation is referred to as the inverse. Marginal revenue is the additional revenue earned by selling an additional unit of output. Marginal revenue is an economic metric defined as the increase in a company s gross revenue from selling one additional unit of its product. Marginal cost is the additional cost a firm must incur when it sells an additional unit of output.

Because marginal revenue is the derivative of total revenue we can construct the marginal revenue curve by calculating total revenue as a function of quantity and then taking the derivative. This is because the price remains constant over varying levels of output. For example if you owned a coffee shop which sold coffees for 5 each the marginal revenue would be 5.