Differences between Marginal Cost and Marginal Revenue
The main difference between Marginal Cost and Marginal Revenue is that marginal cost refers to the additional cost incurred by producing one more unit of a product, while marginal revenue refers to the additional revenue generated by selling one more unit of a product.
Before we move to more differences, let’s first understand Marginal Cost and Marginal Revenue:
- Marginal Cost: Marginal cost refers to the additional cost incurred by a business or organization when producing one additional unit of a product or service.
- Marginal Revenue: Marginal revenue refers to the additional revenue generated by selling one additional unit of a product or service.
Now, let’s get to Marginal Cost vs Marginal Revenue:
Major differences between Marginal Cost and Marginal Revenue
|Marginal Cost||Marginal Revenue|
|Marginal cost is calculated by dividing the change in total cost by the change in quantity.||Marginal revenue is calculated by dividing the change in total revenue by the change in quantity.|
|The marginal cost curve is typically upward-sloping due to diminishing marginal returns.||The marginal revenue curve is typically downward-sloping due to the law of demand.|
|Marginal cost is influenced by the cost of production, the quantity of units produced, and the level of fixed costs.||Marginal revenue is influenced by the price of the product or service and the level of demand.|
|Marginal cost is typically upward sloping, meaning that it increases as more units are produced.||Marginal revenue is typically downward sloping, meaning that it decreases as more units are sold.|
|Marginal cost is important for determining the minimum price at which a product or service can be sold without incurring losses.||Marginal revenue is important for determining the optimal price at which to sell the product or service to maximize profits.|
So, these are the main differences between the entities.
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