Economics Short Run Vs Long Run Costs Questions
In the long run, marginal revenue refers to the additional revenue generated by producing and selling one more unit of output. It is calculated by dividing the change in total revenue by the change in quantity. In a perfectly competitive market, where firms are price takers, marginal revenue is equal to the market price. However, in imperfectly competitive markets, such as monopolies or oligopolies, marginal revenue is less than the market price due to the need to lower prices to sell additional units. In the long run, firms aim to maximize profits by producing at the level where marginal revenue equals marginal cost.