Question

With the help of an example, show how we can get marginal revenue from total revenue.

Answer 1

Marginal revenue is calculated by subtracting the total revenue from (n − 1) units from the total revenue of n units.

symbolic form:

MR_nth = TR_{n −} TR_n−1

For example, if a firm earns ₹300 from selling 15 units and ₹310 from selling 16 units, the marginal revenue from the 16th unit will be MR = ₹310 − ₹300 = ₹10.

This means the additional revenue generated by selling one more unit (the 16th unit) is ₹10.