How is marginal revenue determined?

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pohnpei397 eNotes educator| Certified Educator

Determining marginal revenue is very simple.  Marginal revenue is defined as the change in total revenue that is derived from the sale of one additional unit of output.  Given this definition, we can see that it would be easy to find marginal revenue.  You take the total revenue that you had gotten originally.  Then you simply subtract that from the total revenue that have after selling the next unit.  This gives you the marginal revenue gained from selling the last unit of product.

For example, let's say you have sold 10 items and gotten $85.  After you sell the 11th item, you have $90.  In that case, you do $90 - $85 = $5 and $5 is your marginal revenue.