Marginal Revenue Calculator

What is Marginal Revenue?

Marginal revenue (MR) is the additional income generated by selling one extra unit of a product or service. It helps businesses measure how total revenue scales with increases in sales volume.

Marginal Revenue Formula

The marginal revenue formula divides the total change in revenue by the change in quantity sold:

\[ \text{Marginal Revenue (MR)} = \frac{\Delta TR}{\Delta Q} = \frac{\text{TR}_2 - \text{TR}_1}{Q_2 - Q_1} \]

Where:

• $\Delta TR$: Change in total revenue (Final Revenue - Initial Revenue).
• $\Delta Q$: Change in quantity of units sold (Final Quantity - Initial Quantity).

Profit Maximization Rule ($MR = MC$)

In microeconomics, a firm maximizes profit at the production quantity where marginal revenue equals marginal cost:

\[ \text{Profit Max Output} \implies MR = MC \]

• If $MR > MC$: Producing and selling more units increases overall net profit.
• If $MR < MC$: Producing and selling additional units reduces net profit because costs outweigh revenues.
• If $MR = MC$: Total profit reaches its theoretical maximum point.

Related Tools

• Marginal Cost Calculator - Calculate additional cost per unit produced.
• Profit Margin Calculator - Calculate net profit margin and gross profit margin percentages.