Marginal revenue is the extra revenue a firm earns from selling one additional unit of a product.
Economists calculate it as the change in total revenue divided by the change in quantity sold. If selling ten units brings in $100 and selling eleven brings in $108, the marginal revenue of the eleventh unit is $8. The concept helps firms compare the gain from one more sale with the marginal cost of producing that unit.
For a perfectly competitive firm, marginal revenue equals the market price because the firm can sell additional units at the same price. A firm with market power may need to lower its price to sell more, so its marginal revenue is generally below the price of the additional unit.
Marginal revenue is not the same as average revenue, which is revenue per unit, or total revenue, which is all sales income. Profit-maximizing firms commonly expand output while marginal revenue exceeds marginal cost and stop where the two are equal, subject to market conditions.