1. What is Marginal Revenue?

Marginal Revenue (MR) is the additional revenue generated from selling one more unit of a good or service. It's a fundamental 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
• \( \Delta TR \) — Change in Total Revenue
• \( \Delta Q \) — Change in Quantity sold

Explanation: The formula calculates how much revenue changes when quantity sold changes by one unit. This helps businesses understand how sales volume affects total revenue.

3. Importance of Marginal Revenue

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

4. Using the Calculator

Tips: Enter the change in total revenue (in dollars) and the change in quantity sold (in units). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the relationship between MR and price?
A: For perfectly competitive markets, MR equals price. For monopolies or firms with market power, MR is typically less than price.

Q2: Can Marginal Revenue be negative?
A: Yes, when selling additional units requires lowering the price so much that total revenue decreases.

Q3: How does MR relate to elasticity?
A: When demand is elastic, MR is positive. When demand is inelastic, MR is negative.

Q4: Why is MR important for pricing decisions?
A: Comparing MR to MC helps determine whether producing/selling more units will increase profits.

Q5: How often should MR be calculated?
A: Regular MR analysis helps businesses adapt to market changes and maintain optimal pricing.