The marginal revenue (MR) of a firm is defined as:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → the increase in total revenue for a unit increase in the firm’s output
Marginal revenue is the extra revenue from selling one more unit. In the candle example, TR rises from Rs 20 to Rs 30 when sales rise from 2 to 3 boxes, so MR = Rs 10.
Option (1) the total revenue earned per unit of the firm’s output — Incorrect. This is average revenue (AR).
Option (2) the increase in total revenue for a unit increase in the firm’s output — Correct. MR is the change in TR from one more unit.
Option (3) the change in total cost for a unit increase in the firm’s output — Incorrect. This is marginal cost (MC); it is about cost, not revenue.
Option (4) the market price of the good multiplied by the firm’s output — Incorrect. This is total revenue (TR = p × q).
NCERT (2026-27): “4.2 Revenue … The marginal revenue (MR) of a firm is defined as the increase in total revenue for a unit increase in the firm’s output. Consider table 4.1 again. Total revenue from the sale of 2 boxes of candles is Rs.20. Total revenue from the sale of 3 boxes of candles is Rs.30.” “4.2 Revenue … The average revenue ( AR ) of a firm is defined as total revenue per unit of output. Recall that if a firm’s output is q and the market price is p, then TR equals p × q.” |