What Is the Formula Used to Find Marginal Revenue?

By Staff WriterLast Updated April 07, 2020

The formula for marginal revenue is simply dividing the change in total revenue by the change associated with output quantity. Technically speaking, marginal revenue is the revenue associated with the sale of a single, additional product or unit of output.

Analysts advise that marginal revenue actually remains constant over a certain level of product production or output. Nonetheless, marginal revenue is subject to what is known as the law of diminishing returns. Ultimately, marginal revenue slows as the level of production or output increases. A manufacturer who wants to remain competitive in the marketplace produces products until marginal revenue is equal to marginal cost.