Marginal revenue
Also called: MR · Topic: Theory of the Firm, Supply and Perfect Competition · NCERT: Class 12, Ch 4 "The Theory of the Firm under Perfect Competition"
Meaning
Marginal revenue (MR) is the increase in total revenue from selling one more unit of output. MR = ΔTR/Δq For a price-taking firm, every extra unit sells at the same market price, so each unit adds exactly p to TR. Hence MR = AR = p. MR matters because a firm maximises profit where MR equals marginal cost.
Example
In NCERT's candle example (price ₹10 per box), TR rises from ₹20 at 2 boxes to ₹30 at 3 boxes. So MR = (30 − 20)/(3 − 2) = ₹10, which is the market price.
Don't confuse with
- Average revenue: this is revenue per unit (TR/q). For a monopoly or monopolistic competition, the firm must cut price to sell more, so MR is less than AR.