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marginal revenue = price

The formula for marginal revenue is:

marginal revenue =  change in total revenue change in quantity
Price Quantity Total Revenue Marginal Revenue
$4 1 $4 -
$4 2 $8 $4
$4 3 $12 $4
$4 4 $16 $4

Notice that marginal revenue does not change as the firm produces more output. That is because the price is determined by supply and demand and does not change as the farmer produces more (keeping in mind that, due to the relative small size of each firm, increasing their supply has no impact on the total market supply where price is determined).

Since a perfectly competitive firm is a price taker, it can sell whatever quantity it wishes at the market-determined price. Marginal cost, the cost per additional unit sold, is calculated by dividing the change in total cost by the change in quantity. The formula for marginal cost is:

marginal cost =  change in total cost change in quantity

Ordinarily, marginal cost changes as the firm produces a greater quantity.

In the raspberry farm example, shown in [link] , [link] and [link] , marginal cost at first declines as production increases from 10 to 20 to 30 packs of raspberries—which represents the area of increasing marginal returns that is not uncommon at low levels of production. But then marginal costs start to increase, displaying the typical pattern of diminishing marginal returns. If the firm is producing at a quantity where MR>MC, like 40 or 50 packs of raspberries, then it can increase profit by increasing output because the marginal revenue is exceeding the marginal cost. If the firm is producing at a quantity where MC>MR, like 90 or 100 packs, then it can increase profit by reducing output because the reductions in marginal cost will exceed the reductions in marginal revenue. The firm’s profit-maximizing choice of output will occur where MR = MC (or at a choice close to that point). You will notice that what occurs on the production side is exemplified on the cost side. This is referred to as duality.

Marginal revenues and marginal costs at the raspberry farm: individual farmer

The market-level graph shows that the equilibrium price ($4.00) is determined through the interaction between market demand and market supply.
For a perfectly competitive firm, the marginal revenue (MR) curve is a horizontal straight line because it is equal to the price of the good, which is determined by the market, shown in [link] . The marginal cost (MC) curve is sometimes first downward-sloping, if there is a region of increasing marginal returns at low levels of output, but is eventually upward-sloping at higher levels of output as diminishing marginal returns kick in.

Marginal revenues and marginal costs at the raspberry farm: raspberry market

The firm-level graph shows how a firm uses the market price to determine its profit-maximizing level of output.
The equilibrium price of raspberries is determined through the interaction of market supply and market demand at $4.00.
Marginal revenues and marginal costs at the raspberry farm
Quantity Total Cost Fixed Cost Variable Cost Marginal Cost Total Revenue Marginal Revenue
0 $62 $62 - - - -
10 $90 $62 $28 $2.80 $40 $4.00
20 $110 $62 $48 $2.00 $80 $4.00
30 $126 $62 $64 $1.60 $120 $4.00
40 $144 $62 $82 $1.80 $160 $4.00
50 $166 $62 $104 $2.20 $200 $4.00
60 $192 $62 $130 $2.60 $240 $4.00
70 $224 $62 $162 $3.20 $280 $4.00
80 $264 $62 $202 $4.00 $320 $4.00
90 $324 $62 $262 $6.00 $360 $4.00
100 $404 $62 $342 $8.00 $400 $4.00

Questions & Answers

what is Price mechanism
Dhany Reply
introduction to economics
Uday Reply
welfare definition of economics
examine the wealth and welfare definitions of economics
read book by ml jhingan
What do we mean by Asian tigers
Aeesha Reply
Dm me I will tell u
What is Average revenue
How are u doing
it is so fantastic
it is a group of 4 countries named Singapore, South Korea, Taiwan and Hong Kong because their economies are growing very faster
what's a demand
Edward Reply
it is the quantity of commodities that consumers are willing and able to purchase at particular prices and at a given time
quantity of commodities dgat consumers are willing to pat at particular price
demand depends upon 2 things 1wish to buy 2 have purchasing power of that deserving commodity except any from both can't be said demand.
Demand is a various quantity of a commodities that a consumer is willing and able to buy at a particular price within a given period of time. All other things been equal.
State the law of demand
The desire to get something is called demand.
what is the use of something should pay for its opportunity foregone to indicate?
Random Reply
Why in monopoly does the firm maximize profits when its marginal revenue equals marginal cost
astrid Reply
different between economic n history
Falma Reply
If it is known that the base change of RM45 million, the statutory proposal ratio of 7 per cent, and the public cash holding ratio of 5 per cent, what is the proposed ratio of bank surplus to generate a total deposit of RM 300 million? 
Jeslyne Reply
In a single bank system, a bank can create a deposit when it receives a new deposit in cash. If a depositor puts a cash deposit of RM10,000 into the bank, assume the statutory reserve requirement is 7% and the bank adopts a surplus reserve of 8%. a. Calculate the amount of deposits made at the end o
the part of marginal revenue product curve lies in the _ stage of production is called form demand curve for variable input.
Bashir Reply
The cost associated with the inputs owned by the farmer is termed as
the cost associated with inputs owned by the farmer is termed as ____
why do we study economic
Nwobodo Reply
we study economics to know how to manage our limited resources
we study economics the know how to use our resources and where to put it
what is end
we study economics to make rational decision
we study economics only to know how to effectively and efficiently allocate our limited resource in other to meet our unlimited wants
We study economics inorder for us to know the difference of the needs and wants and aslo how to use the limited resources that are available
who is the father of economy
Yajanyi Reply
adam smith
Adam smith
professor Lionel Robins
adam smith
mariginal utility is finalized by who?
Adam Smith
Adam smith
Adam Smith
Adam smith
adam smith barter system
why we study economics
Kitojo Reply
what is equilibrium price?
This is the price In which quantity demanded is equal to the quantity supplied.
what is the principle of demand
is when the price of two item is equal
is the market price at which the demand curve and supply curve of particular commodity interest.
can we say that without macroeconomics,microeconomics can succeed? and why?
equilibrium price is when prices are equal
equilibrium price is a point at which demand and supply curve meet
please can you give us the correct answer after the lesson to be compared to our answers
Gloria Reply
in what?
why economics is the real life subject
because it is subjected to human decisions
why might an increase in money national income not necssarily lead to an increase in the standards of living
pls,who is a legal tender.can you explain well
Mary Reply
We think, that the legal tender is a form of payment of a debt or anything related, but which is not necessarily money. that can be bank notes, or coins for instance. but the bottom line is the legal tender is required to be recognized by the law, but it varies according to the jurisdiction.
Is it something like cheque
legal tender is anything that can be accepted for payment within a country
is Something legally accepted in a particular place

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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