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Business Definition for: marginal revenue
marginal revenue

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

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.

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.

See also marginal cost
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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