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Commerce Exam  >  Commerce Questions  >  Marginal Revenue isa)Same as total revenueb)A... Start Learning for Free
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Marginal Revenue is
  • a)
    Same as total revenue
  • b)
    Addition to the total revenue on the production of an additional unit of Output
  • c)
    Addition to the total revenue on the sale of an additional unit of Output
  • d)
    Additional cost involved in production
Correct answer is option 'C'. Can you explain this answer?
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Marginal Revenue isa)Same as total revenueb)Addition to the total reve...
**Marginal Revenue: Addition to the total revenue on the sale of an additional unit of Output**

Marginal revenue is a concept used in economics to describe the additional revenue generated from the sale of one additional unit of output or product. It is the change in total revenue that occurs as a result of producing and selling one more unit of a product.

**Explanation:**

Marginal revenue is calculated by dividing the change in total revenue by the change in the quantity of output sold. It represents the increase in revenue that a firm earns when it sells one more unit of output.

To understand this concept, let's consider an example of a company that sells smartphones. Suppose the company sells its smartphones for $500 each, and it sells 1000 units in a month, resulting in a total revenue of $500,000. Now, if the company decides to produce and sell one more smartphone, it would have to adjust its price to attract buyers. Let's assume the company reduces the price to $400 for the additional unit.

In this case, the marginal revenue for the additional unit would be $400 because that is the amount of revenue generated from the sale of that unit. The total revenue after selling 1001 units would be $500,000 + $400 = $500,400. Therefore, the marginal revenue for the additional unit is $400.

It is important to note that marginal revenue can vary depending on the market conditions, demand for the product, and the pricing strategies employed by the firm. In some cases, marginal revenue may be positive, indicating an increase in revenue from selling an additional unit. However, in certain situations, such as when the market is highly competitive, marginal revenue may be negative, indicating a decrease in revenue from selling an additional unit.

Overall, marginal revenue is a crucial concept for businesses as it helps them determine the optimal level of production and pricing strategies to maximize their profits. By understanding the change in revenue associated with each additional unit of output, firms can make informed decisions regarding their production and pricing policies.
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Marginal Revenue isa)Same as total revenueb)Addition to the total reve...
Marginal revenue means an increase in revenue with
the increase in sale by one 
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Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The slope of the Total Revenue equals ……..

Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The marginal revenue curve shows the relationship between ..................... and ......................

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Marginal Revenue isa)Same as total revenueb)Addition to the total revenue on the production of an additional unit of Outputc)Addition to the total revenue on the sale of an additional unit of Outputd)Additional cost involved in productionCorrect answer is option 'C'. Can you explain this answer?
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