Marginal Revenue — Smart Financial Analysis
Calculate marginal revenue (MR = ΔTR/ΔQ). In perfect competition MR = Price; in monopoly MR < Price and falls twice as fast. Profit max where MR = MC.
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Marginal revenue (MR) is the additional revenue earned from selling one more unit of output. MR = ΔTR / ΔQ (Change in Total Revenue ÷ Change in Quantity). In perfect competition, firms are price takers — they can sell any quantity at the market price without affecting it. In monopoly, to sell more you must lower price.
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Why: Marginal revenue (MR) is the additional revenue earned from selling one more unit of output. It equals the change in total revenue divided by the change in quantity (ΔTR/ΔQ). In...
How: Enter Initial Revenue ($), Final Revenue ($), Initial Quantity to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
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📋 Quick Examples — Click to Load
📈 MR Curve vs Demand Curve
MR falls twice as fast as demand for linear demand
📊 MR = MC Intersection
Profit maximization point
📊 MR by Market Structure
Perfect vs monopoly vs oligopoly
🍩 Revenue vs Quantity Breakdown
Doughnut breakdown
Marginal Revenue
MR = ΔTR/ΔQ = $15.00 / 1 = $15.00 per unit.
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
Marginal Revenue analysis is used by millions of people worldwide to make better financial decisions.
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— NBER Research
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Marginal Revenue = Change in Total Revenue / Change in Quantity (ΔTR/ΔQ). In perfect competition, MR = Price (constant). In monopoly/oligopoly, MR < Price and declines because selling more requires lowering price on ALL units. The MR curve lies below the demand curve and falls twice as fast. Profit maximization: produce where MR = MC. If MR > MC, produce more. When MR = 0, total revenue is maximized. Elastic demand (|E| > 1) → positive MR; inelastic (|E| < 1) → negative MR. This is why monopolists always produce in the elastic portion of demand.
Sources: MIT OpenCourseWare, Khan Academy, Mankiw Principles of Economics, Federal Reserve.
Key Takeaways
- • MR = ΔTR / ΔQ — the revenue from one more unit
- • Perfect competition: MR = Price (horizontal demand)
- • Monopoly: MR < Price, MR curve falls twice as fast as demand
- • Profit max: produce where MR = MC
Did You Know?
How Does Marginal Revenue Work?
Basic Formula
MR = (Final Revenue - Initial Revenue) / (Final Quantity - Initial Quantity). Example: $1015 - $1000 over 51 - 50 units = $15 per unit.
Perfect Competition
Each unit adds exactly the market price to revenue. MR = Price always. No need to cut price to sell more.
Monopoly & Imperfect Competition
To sell more, you must lower price. That lower price applies to all units, so MR < Price. The MR curve has twice the slope of the demand curve.
Expert Tips
MR by Market Structure
| Market | MR vs Price | Demand Curve |
|---|---|---|
| Perfect Competition | MR = Price | Horizontal |
| Monopoly | MR < Price | Downward sloping |
| Oligopoly | MR < Price | Kinked or downward |
Frequently Asked Questions
What is marginal revenue?
Marginal revenue (MR) is the additional revenue earned from selling one more unit of output. It equals the change in total revenue divided by the change in quantity (ΔTR/ΔQ). In perfect competition, MR equals price because firms can sell any quantity at the market price. In monopoly, MR is less than price because selling more requires lowering price on ALL units.
What is the marginal revenue formula?
MR = ΔTR / ΔQ (Change in Total Revenue ÷ Change in Quantity). For linear demand P = a - bQ, the MR curve is MR = a - 2bQ — it falls twice as fast as the demand curve. Example: Revenue $1000 at 50 units, $1015 at 51 units → MR = $15 per additional unit.
Why is MR equal to price in perfect competition?
In perfect competition, firms are price takers — they can sell any quantity at the market price without affecting it. So each additional unit sold adds exactly the price to revenue. MR = Price always. If price is $20, selling the 101st unit adds $20 to revenue — MR = $20.
Why is MR less than price in monopoly?
In monopoly, to sell more you must lower price. That lower price applies to ALL units sold, not just the new one. So the revenue from the extra unit is partly offset by lost revenue on previous units. Example: At 50 units, revenue $1000 ($20/unit). To sell 51, you cut price — revenue becomes $1015. MR = $15, less than the new price because you gave up $5 on the first 50 units.
How does demand elasticity affect marginal revenue?
When demand is elastic (|E| > 1), a price cut raises quantity enough that total revenue increases — MR is positive. When demand is inelastic (|E| < 1), a price cut raises quantity too little — total revenue falls, MR is negative. Monopolists always produce in the elastic portion of demand because MR = MC requires positive MR.
What is the MR equals MC rule?
Profit maximization occurs where Marginal Revenue = Marginal Cost (MR = MC). If MR > MC, producing one more unit adds more to revenue than cost — produce more. If MR < MC, the last unit cost more than it earned — produce less. At MR = MC, you're at the optimal output. This rule applies to all market structures.
Key Statistics
Official Data Sources
⚠️ Disclaimer: This calculator is for educational purposes only. Marginal revenue concepts apply to simplified economic models. Real-world markets involve additional factors. Not financial or business advice.
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