Marginal Revenue Calculator
From the change in total revenue and the change in quantity sold, work out the marginal revenue of each extra unit sold.
Input Data
Results
At a glance:Marginal revenue is the extra revenue from selling one more unit. Marginal revenue = (new total revenue − initial total revenue) ÷ (new quantity − initial quantity).
Formula
Marginal revenue = (new revenue − initial revenue) ÷ (new quantity − initial quantity).
$$MR = \\dfrac{\\Delta \\text{TR}}{\\Delta Q} = \\dfrac{\\text{TR}_{\\text{new}} - \\text{TR}_{\\text{old}}}{Q_{\\text{new}} - Q_{\\text{old}}}$$How to Use
- Enter the total revenue before the increase.
- Enter the total revenue and quantity after the increase.
- Read the marginal revenue per extra unit.
FAQ
What is the difference between marginal revenue and the selling price?
In a perfectly competitive market the firm is a price-taker and marginal revenue equals the market price. But when a firm has pricing power, selling more usually requires cutting the price, and that cut applies to all units sold, so the net extra revenue from one more unit (marginal revenue) is below the price and falls as volume rises. The price is the tag per unit; marginal revenue is the actual contribution of one more unit to total revenue.
Why does marginal revenue decline?
When a firm has pricing power, attracting more buyers often means lowering the price, and the cut applies to units that could have sold at the higher price, reducing the net gain from each extra unit. So marginal revenue typically falls with volume and can even turn negative (the revenue lost from the price cut exceeds the revenue from the extra unit). That is why blindly producing and discounting more does not necessarily raise total profit.
How do I use marginal revenue to find the optimal output?
The golden rule of profit maximisation is marginal revenue equals marginal cost (MR = MC). When MR > MC, selling one more unit brings more revenue than cost, so expand; when MR < MC, cutting production earns more; profit is maximised where they are equal. So read marginal revenue together with marginal cost — either alone cannot pin down the optimal output.
Why is profit maximised when MR = MC, and how do I use this rule?
MR = MC is the most important decision rule in microeconomics. Marginal revenue (MR) is how much total revenue rises from one more unit sold; marginal cost (MC) is how much total cost rises from one more unit made. Each extra unit adds (MR − MC) to total profit. When MR > MC, the extra revenue exceeds the extra cost, so each extra unit increases total profit and you should keep expanding. When MR < MC, the extra unit costs more than it earns, so cutting those units raises profit. When MR = MC, the unit is break-even and you are at the peak of profit — the point where producing more or less no longer helps. Practically: use this calculator to get marginal revenue at different volume intervals, use the Marginal Cost Calculator for the corresponding MC, and find the output where they are equal — that is the theoretical optimal output. In reality both MR and MC change with volume (MR usually declines, MC typically falls then rises), and the rule assumes profit-maximising, fully-informed behaviour, so also consider capacity, demand and competition.
How does marginal revenue differ from price, and why can it be below price or even negative?
Many assume the extra revenue from one more unit equals its price — true only in special cases, not in most markets with pricing power. Price is what one item is tagged at; marginal revenue is how much total revenue actually changes from selling one more unit. Under perfect competition (price-taker, no pricing power), the firm sells any quantity at the market price without affecting it, so MR = price. But with pricing power (monopoly, oligopoly, differentiated product) the firm faces a downward-sloping demand curve: to sell more it usually must cut the price, and crucially that cut often applies to all units, not just the extra one. Example: selling 10 units at HK$100 earns HK$1,000; to sell the 11th unit the price drops to HK$95, so not only does the 11th sell for HK$95, the first 10 also now sell for HK$95 (losing 10 × 5 = HK$50). The real revenue change from the 11th unit is 95 − 50 = HK$45 — far below the HK$95 price. That is why MR is usually below price when a firm has pricing power, and as volume grows and discounts deepen, MR keeps declining; once the revenue lost on existing units exceeds the revenue from the extra unit, MR goes negative — meaning more output actually reduces total revenue. This is why firms do not endlessly discount: beyond a point, selling more lowers revenue and profit.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.