Question

How do u find marginal revenue?

Answer 1

Marginal Revenue is the difference between present total revenue and the previous total revenue. It is an addition made to the total revenue.

Explanation:

Marginal Revenue is the additional revenue made to the total revenue from the sale of one more unit of a good.

When the sale increase from 2 units to 3 units. The TR increases from $.36 to $.48. The additional revenue made to the total revenue is $.12. MR of the 3rd unit is $.12.

The Formula to calculate MR is -

`MR_n =TR_n -TR_(n-1)`
`MR_3 =TR_3 -TR_(3-1)`
`MR_3 =TR_3 -TR_2`
`MR_3 =48 -36=12`

There is another formula also -

`MR =( Delta(TR))/(DeltaQ)`

When the sales moves from 4 units to 5 units `DeltaQ = 1`, and `Delta TR= (60-56) = 4`

MR of the 5th unit is `MR =4/1=4`