The marginal revenue of a company is the additional income generated from selling an additional unit of a product. It is calculated by subtracting the revenue earned from selling the second-to-last unit from the revenue earned from selling the last unit. For instance, if a company sells 10 units of a product for $100 and then sells 11 units for $110, the marginal revenue for the 11th unit is $10.
Marginal revenue is the extra revenue obtained from selling an additional unit of a product or service. For instance, if a company sells 100 units of a product for $10 each and then sells 101 units for $9.50 each, the marginal revenue for the 101st unit is $9.50. Similarly, a restaurant that sells 50 meals for $20 each and then sells 51 meals for $19 each has a marginal revenue of $19. These examples illustrate how marginal revenue is determined by examining the change in revenue resulting from the sale of one more unit. In both cases, the marginal revenue is lower than the price of the previous unit because the company had to reduce the price to sell the additional unit.
No, marginal revenue refers to the additional revenue generated from selling one additional unit of a product or service, while total revenue represents the overall revenue earned from all units sold.
Marginal revenue is calculated by subtracting the revenue generated from selling the previous quantity of units from the revenue generated from selling the current quantity of units.
Marginal revenue helps businesses determine the optimal quantity of units to produce and sell in order to maximize profits. It provides insights into the revenue generated from each additional unit sold and helps in making pricing and production decisions.
Yes, marginal revenue can be negative if the revenue generated from selling an additional unit is less than the revenue generated from selling the previous unit. This typically occurs when demand for the product or service decreases.
Marginal revenue and marginal cost are closely related. To maximize profits, businesses aim to produce and sell the quantity of units where marginal revenue equals marginal cost. This is known as the profit-maximizing level of output.
No, marginal revenue does not always decrease. It can increase, decrease, or remain constant depending on various factors such as market demand, pricing strategies, and competition.
No, marginal revenue cannot be higher than total revenue. Marginal revenue represents the additional revenue generated from selling one additional unit, while total revenue represents the overall revenue earned from all units sold.
Marginal revenue helps businesses determine the optimal price to charge for their products or services. By analyzing the relationship between marginal revenue and marginal cost, businesses can set prices that maximize their profits.
No, marginal revenue and average revenue are different concepts. Marginal revenue refers to the additional revenue generated from selling one additional unit, while average revenue represents the revenue earned per unit sold.
Marginal revenue plays a crucial role in determining market competitiveness. Businesses with higher marginal revenue have a competitive advantage as they can lower prices or invest in marketing to attract more customers. This can lead to increased market share and profitability.
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This glossary post was last updated: 17th April 2024.
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