Marginal Revenue

In economics

Marginal revenue (MR) is the change in total revenue divided by the change in quantity. In perfect competition, MR equals the market price because each unit sells at the same price; under monopoly, MR is below price because selling more requires cutting the price on all units. The profit-maximizing rule MR = MC uses this concept.

Example

A monopolist selling 100 units at $20 who must cut price to$19.90 to sell 101 units gains $19.90 but loses$0.10 on each of the first 100 — marginal revenue is $9.90, well below the$19.90 price.