What is marginal revenue?
Enter two quantities and the total revenue at each, or the price at each, to see the marginal revenue, the extra revenue each extra unit brings in.
- Marginal revenue
- $1,000.00
Going from $1,200.00 to $2,200.00 of revenue is a marginal revenue of $1,000.00 per unit.
- Change in total revenue
- $1,000.00
- Change in quantity
- 1
- Starting total revenue
- $1,200.00
- New total revenue
- $2,200.00
Marginal revenue: $1,000.00. Going from $1,200.00 to $2,200.00 of revenue is a marginal revenue of $1,000.00 per unit.
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How to calculate
Computes marginal revenue, the extra revenue from each extra unit sold, from the total revenue or the price at two quantities.
Example with the default inputs (I know the Total revenue, Starting quantity 1, Total revenue at the start $1,200.00, New quantity 2, Total revenue at the new quantity $2,200.00): Going from $1,200.00 to $2,200.00 of revenue is a marginal revenue of $1,000.00 per unit.
Method: Marginal revenue = (TR₂ − TR₁) ÷ (Q₂ − Q₁), where TR is total revenue at quantity Q; from prices, TR = price × Q.
- Marginal revenue is the average over the change in quantity: for a change of more than 1 unit it is revenue per extra unit.
- Arithmetic is exact on the typed decimals; money shows to the cent, halves up.
Worked examples
Each example is checked against the calculator on every build.
- I know the Total revenue, Starting quantity 1, Total revenue at the start $1,200.00, New quantity 2, Total revenue at the new quantity $2,200.00 gives Marginal revenue $1,000.00.Source: OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price, Table 9.3 (HealthPill: marginal revenue = change in total revenue ÷ change in quantity). https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price: (2,200 − 1,200) ÷ (2 − 1) = 1,000
- I know the Price per unit, Starting quantity 4, Price at the start $900.00, New quantity 5, Price at the new quantity $800.00 gives Marginal revenue $400.00, Starting total revenue $3,600.00, New total revenue $4,000.00.Source: OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price, Table 9.3 (HealthPill: marginal revenue = change in total revenue ÷ change in quantity). https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price: 5 × 800 − 4 × 900 = 400
- I know the Price per unit, Starting quantity 7, Price at the start $600.00, New quantity 8, Price at the new quantity $500.00 gives Marginal revenue -$200.00.Source: OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price, Table 9.3 (HealthPill: marginal revenue = change in total revenue ÷ change in quantity). https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price: 8 × 500 − 7 × 600 = 4,000 − 4,200 = −200
- I know the Total revenue, Starting quantity 100, Total revenue at the start $5,000.00, New quantity 130, Total revenue at the new quantity $6,125.00 gives Marginal revenue $37.50, Change in quantity 30.
How it works
With total revenue TR₁ at quantity Q₁ and TR₂ at Q₂:
- Marginal revenue MR = (TR₂ − TR₁) ÷ (Q₂ − Q₁)
When you know prices instead, the calculator first works out each total revenue:
- TR₁ = P₁ × Q₁ and TR₂ = P₂ × Q₂
The page also shows the change in revenue, the change in quantity and both total revenues.
Rules:
- Quantities, revenues and prices are 0 or more, each at most 1 trillion. Quantities may have decimals.
- The two quantities must differ. The new quantity may be lower than the starting one; the result is the same marginal revenue over that range. A change in quantity so small that the result is too large to show gives no answer.
- The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).
Assumptions
- Marginal revenue over a change of several units is the average revenue per extra unit across that change.
Worked examples by hand
HealthPill, 1 to 2 units. MR = (2,200 − 1,200) ÷ (2 − 1) = $1,000.
HealthPill, 4 units at $900 to 5 units at $800. TR₁ = 4 × 900 = $3,600, TR₂ = 5 × 800 = $4,000. MR = 400 ÷ 1 = $400.
HealthPill, 7 units at $600 to 8 units at $500. TR₁ = $4,200, TR₂ = $4,000. MR = −$200.
100 to 130 units. Revenue goes from $5,000 to $6,125. MR = 1,125 ÷ 30 = $37.50.
Other questions people ask
What is marginal revenue?
Marginal revenue is the extra revenue a business earns by selling one more unit. When it sells several more units at once, it is the change in total revenue divided by the change in quantity.
How do I calculate marginal revenue?
Take the change in total revenue and divide it by the change in quantity. In the OpenStax HealthPill example, revenue goes from $1,200 at 1 unit to $2,200 at 2 units, so marginal revenue is (2,200 − 1,200) ÷ (2 − 1) = $1,000.
How do I find marginal revenue from prices?
Work out total revenue at each quantity as price × quantity, then divide the change by the change in quantity. 4 units at $900 bring in $3,600 and 5 units at $800 bring in $4,000, so the 5th unit adds $400.
Can marginal revenue be negative?
Yes. When a firm must cut its price to sell more, the lower price applies to every unit. Past a point the loss on the earlier units is larger than the gain from the extra one. Going from 7 units at $600 to 8 units at $500 lowers revenue by $200.
Why does marginal revenue equal price in perfect competition?
A firm in a perfectly competitive market can sell as much as it likes at the market price, so each extra unit adds exactly that price to revenue. Marginal revenue is then a flat line at the price.
How is marginal revenue used?
A firm makes the most profit at the quantity where marginal revenue equals marginal cost. Below that quantity, an extra unit adds more revenue than cost; above it, an extra unit adds more cost than revenue.