Marginal revenue is defined as the change in the total revenue that occurs due to the sale of one more unit of output. It is calculated as
MRn = TRn - TRn - 1
Where,
MRn = Marginal revenue due to nth unit of output
TRn = Total revenue due to n units of output
TRn -1 = Total revenue due to (n - 1) units of output
Suppose that the market price is P
MRn = TRn - TRn -1
= PQn - P(Qn -1)
MR = PQn - PQn + P
MR = P. Thus, for a perfect competitive firm, marginal revenue is equal to the market price per unit of output.
