Which of the following best describes marginal revenue?

• A. The change in total cost resulting from producing one more unit.
• B. The difference between price and average cost for each unit sold.
• C. The total revenue divided by the number of units sold.
• D. The additional revenue generated from selling one more unit of output.

Answer: (D)

Verified step by step guidance

1. Understand that marginal revenue (MR) refers to the additional revenue a firm earns by selling one more unit of a good or service.
2. Recall the formula for marginal revenue: \(MR = \frac{\Delta TR}{\Delta Q}\), where \(\Delta TR\) is the change in total revenue and \(\Delta Q\) is the change in quantity sold (usually one unit).
3. Recognize that marginal revenue is different from total revenue divided by quantity (which is average revenue) and from profit-related concepts like the difference between price and average cost.
4. Note that marginal revenue focuses solely on the revenue side, not on costs, so it is not related to changes in total cost.
5. Conclude that the best description of marginal revenue is the additional revenue generated from selling one more unit of output.