Answer: Marginal cost is the money paid for producing one more unit of a good. Marginal revenue is the money earned from selling one more unit of a good.
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What is the difference between marginal cost and marginal revenue?
Marginal revenue (or marginal benefit) is a central concept in microeconomics that describes the additional total revenue generated by increasing product sales by 1 unit. To derive the value of marginal revenue it is required to examine the difference between the aggregate benefits a firm received from the quantity of a good and service produced last period and the current period with one extra unit i…
Marginal revenue (or marginal benefit) is a central concept in microeconomics that describes the additional total revenue generated by increasing product sales by 1 unit. To derive the value of marginal revenue it is required to examine the difference between the aggregate benefits a firm received from the quantity of a good and service produced last period and the current period with one extra unit increase in the rate of production. Marginal revenue is a fundamental tool for economic decision making within a firm's setting together with marginal cost to be considered. In a perfectly competitive market the incremental revenue generated by selling an additional unit of a good is equal to the price the firm is able to charge the buyer of the good. This is because a firm in a competitive market will always get the same price for every unit it sells regardless of the number of units the firm sells since the firm's sales can never impact the industry's price. Therefore in a perfectly competitive market firms set the price level equal to their marginal revenue ${\displaystyle (MR=P)}$. In imperfect competition a monopoly firm is a large producer in the market and changes in its output levels impact market prices determining the whole industry's sales. Therefore a monopoly firm lowers its price on all units sold in order to increase output (quantity) by 1 unit. Since a reduction in price leads to a decline in revenue on each good sold by the firm the marginal revenue generated is always lower than the price level charged ${\displaystyle (MRMC}$then a profit-maximizin… Read more on Wikipedia
Marginal revenue is equal to the ratio of the change in revenue for some change in quantity sold to that change in quantity sold. This can be formulated as: ${\displaystyle MR={\frac {\Delta TR}{\Delta Q}}}$
Marginal revenue is equal to the ratio of the change in revenue for some change in quantity sold to that change in quantity sold. This can be formulated as: ${\displaystyle MR={\frac {\Delta TR}{\Delta Q}}}$ This can also be represented as a derivative when the change in quantity sold becomes arbitrarily small. Define the revenue function to be ${\displaystyle R(Q)=P(Q)\cdot Q }$ where Q is output and P(Q) is the inverse demand function of customers. By the product rule marginal revenue is then given by ${\displaystyle R'(Q)=P(Q)+P'(Q)\cdot Q }$ where the prime sign indicates a derivative. For a firm facing perfect competition price does not change with quantity sold (${\displaystyle P'(Q)=0}$) so marginal revenue is equal to price. For a monopoly the price decreases with quantity sold (${\displaystyle P'(Q)<0}$) so marginal revenue is less than price for positive ${\displaystyle Q}$ (see Example 1). Read more on Wikipedia
In economics marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit; that is it is the cost of producing one more unit of a good. Intuitively marginal cost at each level of production includes the cost of any additional inputs required to produce the next unit. At each level of production and time period being considered marginal costs include all costs that vary with the level of production whereas other costs that do not vary with production are fixed and thus have no marginal cost. For example the marginal cost of producing an automobile will generall…
In economics marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit; that is it is the cost of producing one more unit of a good. Intuitively marginal cost at each level of production includes the cost of any additional inputs required to produce the next unit. At each level of production and time period being considered marginal costs include all costs that vary with the level of production whereas other cos...
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