Marginal Revenue Calculator
Calculate marginal revenue — the additional revenue gained from selling one more unit. Enter total revenue and quantity at two output levels to find how much each extra unit adds to revenue.
How to use this tool
- Enter total revenue at quantity 1, quantity 1, total revenue at quantity 2 and quantity 2 in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your marginal revenue per unit and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
MR = ΔTR ÷ ΔQ = (TR2 − TR1) ÷ (Q2 − Q1)
Where TR is total revenue and Q is quantity sold.
How it works
Marginal revenue (MR) measures the additional revenue earned from selling one more unit of output. In perfectly competitive markets, MR equals the market price because each additional unit sells at the same price. In imperfectly competitive markets (monopoly, oligopoly), MR falls below price because a firm must reduce price on all units to sell more.
Firms maximize profit by producing to the point where marginal revenue equals marginal cost (MR = MC). This calculator computes the average MR over a range of output, which approximates the true marginal value at the midpoint.
Worked example
Sales Rise from 100 to 110 Units
- Change in total revenue (ΔTR) = $1,090 − $1,000 = $90.00
- Change in quantity (ΔQ) = 110 − 100 = 10 units
- Marginal revenue = $90 ÷ 10 = $9.00 per unit
Marginal revenue is $9.00 per unit, meaning each additional unit sold in this range adds $9.00 to total revenue.
Common mistakes to avoid
- Dividing total revenue by quantity (average revenue) instead of the change in total revenue by the change in quantity — MR measures the incremental revenue from one more unit, not the average.
- Assuming MR equals price for all firms: in perfect competition MR = Price, but for a monopolist or any price-setter, MR is less than price because selling an additional unit requires lowering the price on all units.
- Using revenues from two entirely different products or time periods as the two data points — MR is meaningful only when comparing the same product at adjacent output levels.
Key terms
- What is marginal revenue?
- Marginal revenue is the change in total revenue that results from selling one additional unit. It equals ΔTR ÷ ΔQ.
- Why is MR less than price for a monopolist?
- A monopolist must lower the price to sell each additional unit, and that lower price applies to all units sold (not just the marginal one). This makes MR less than the price for each unit beyond the first.
- What is the MR = MC rule?
- Profit is maximized at the quantity where marginal revenue equals marginal cost. Producing less leaves profitable units unsold; producing more generates units that cost more than they earn.
- Is MR always positive?
- No. When demand is inelastic, selling more requires a large enough price cut that total revenue falls, making MR negative. MR is zero at the revenue-maximizing output.
Frequently asked questions
- Why is marginal revenue below price for a monopolist?
- A monopolist faces a downward-sloping demand curve and must lower the price to sell each additional unit. The price reduction applies to all units sold, not just the new one, so MR is less than price by the revenue lost on all previous units.
- At what point does marginal revenue become zero?
- MR equals zero at the quantity where total revenue is maximized. For a linear demand curve, this occurs at the midpoint of the demand curve — exactly half the quantity at which price would fall to zero.
- How is MR used alongside MC in pricing decisions?
- Firms compare MR and MC at each output level. If MR > MC, expanding production adds to profit. If MR < MC, production should be cut. The profit-maximizing output is where MR = MC.