marginal revenue

Dictionary of Accounting Terms for: marginal revenue
marginal revenue

change of the total revenue of a business resulting when an extra unit is sold.

Dictionary of Business Terms for: marginal revenue
marginal revenue

change in total revenue caused by one additional unit of output. It is calculated by determining the difference between the total revenues produced before and after a one-unit increase in the rate of production.

Dictionary of Finance and Investment Terms for: marginal revenue
marginal revenue

change in total revenue caused by one additional unit of output. It is calculated by determining the difference between the total revenues produced before and after a one-unit increase in the rate of production. As long as the price of a product is constant, price and marginal revenue are the same; for example, if baseball bats are being sold at a constant price of $10 apiece, a one-unit increase in sales (one baseball bat) translates into an increase in total revenue of $10. But it is often the case that additional output can be sold only if the price is reduced, and that leads to a consideration of marginal cost-the added cost of producing one more unit. Further production is not advisable when marginal cost exceeds marginal revenue since to do so would result in a loss. Conversely, whenever marginal revenue exceeds marginal cost, it is advisable to produce an additional unit. Profits are maximized at the rate of output where marginal revenue equals marginal cost.

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