The change in total revenue resulting from a change in the quantity of output sold. Marginal revenue indicates how much extra revenue a perfectly competitive firm receives for selling an extra unit of output. It is found by dividing the change in total revenue by the change in the quantity of output. Marginal revenue is the slope of the total revenue curve and is one of two revenue concepts derived from total revenue. The other is average revenue. To maximize profit, a perfectly competitive firm equates marginal revenue and marginal cost.

Marginal revenue is the extra revenue generated when a perfectly competitive firm sells one more unit of output. It plays a key role in the profit-maximizing decision of a perfectly competitive firm relative to marginal cost. A perfectly competitive firm maximizes profit by equating marginal revenue, the extra revenue generated from production, with marginal cost, the extra cost of production. If these two marginals are not equal, then profit can be increased by producing more or less output.

Marginal revenue is the extra revenue generated when a perfectly competitive firm sells one more unit of output. It plays a key role in the profit-maximizing decision of a perfectly competitive firm relative to marginal cost. [b]A perfectly competitive firm maximizes profit by equating marginal revenue, the extra revenue generated from production, with marginal cost, the extra cost of production.[/b] If these two marginals are not equal, then profit can be increased by producing more or less output.

For a perfectly competitive firm, marginal revenue is equal to price and average revenue, all three of which are constant.

Perfectly competitive firms continue producing output until marginal revenue equals marginal cost.

Marginal revenue for competitive firms is typically constant. This is because the market dictates the optimal price level and companies do not have much – if any – discretion over the marginal price. As a result, perfectly competitive firms maximize profits when marginal costs equal market prices. Marginal revenue works differently for monopolies. For a monopolist, the marginal benefit of selling an additional unit is less than the market price. A perfectly competitive firm can sell as many units as it wants at the market price, whereas the monopolist can do so only if it cuts prices for its current and subsequent units. Monopolists maximize profits when marginal costs equal marginal revenues, which is significantly lower than market prices.
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