# What is marginal revenue?

Computes marginal revenue, the extra revenue from each extra unit sold, from the total revenue or the price at two quantities.

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## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| from | I know the | Whether you know the total revenue or the price at each quantity. |
| q1 | Starting quantity | Units sold. |
| r1 | Total revenue at the start | Revenue from the starting quantity. |
| p1 | Price at the start | The price per unit at the starting quantity. |
| q2 | New quantity | Units sold. |
| r2 | Total revenue at the new quantity | Revenue from the new quantity. |
| p2 | Price at the new quantity | The price per unit at the new quantity. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| mr | Marginal revenue | Change in total revenue ÷ change in quantity: revenue per extra unit. |
| dRevenue | Change in total revenue | New total revenue − starting total revenue. |
| dQuantity | Change in quantity | New quantity − starting quantity. |
| revenue1 | Starting total revenue | Price × quantity at the start. |
| revenue2 | New total revenue | Price × quantity at the new quantity. |

## Method

Marginal revenue = (TR₂ − TR₁) ÷ (Q₂ − Q₁), where TR is total revenue at quantity Q; from prices, TR = price × Q.

## Assumptions

- 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

1. from = revenue, q1 = 1, r1 = $1,200.00, q2 = 2, r2 = $2,200.00 gives mr = $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.
2. from = price, q1 = 4, p1 = $900.00, q2 = 5, p2 = $800.00 gives mr = $400.00, revenue1 = $3,600.00, revenue2 = $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.
3. from = price, q1 = 7, p1 = $600.00, q2 = 8, p2 = $500.00 gives mr = -$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.
4. from = revenue, q1 = 100, r1 = $5,000.00, q2 = 130, r2 = $6,125.00 gives mr = $37.50, dQuantity = 30.

## FAQ

### 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.

## Sources

- OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price: marginal revenue is the change in total revenue divided by the change in quantity; Table 9.3 (HealthPill) gives price, total revenue and marginal revenue at 1 to 8 units. https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price (retrieved 2026-10-05)