Marginal Revenue

We can define marginal revenue by a formula that should be familiar by now, at least in its broad outlines.

where R is revenue (that is, price times quantity sold) and Q is the quantity sold. As usual, this is an approximative formula, and the smaller the change in Q the better the approximation. We can interpret marginal revenue as (approximately) the increase in total revenue as a result of selling one more unit of output. Here's an example of calculation of the approximation: suppose output increases from 10000 to 11000 and revenue increases from 754286 to 714286. Then we have

Thus, between 10,000 and 11,000 units of output, the marginal revenue is approximately $40.