What is the revenue earned from the sale of each additional unit called?

Marginal revenue refers to the additional revenue that is generated from the sale of one more unit of a product or service. It is a crucial concept in economics as it helps businesses make decisions about production levels and pricing strategies. Understanding marginal revenue allows a firm to determine whether to increase or decrease production based on the additional income generated compared to the costs incurred.

In practical terms, companies analyze marginal revenue to optimize their production processes. If the marginal revenue exceeds the marginal cost (the cost of producing one additional unit), it indicates that producing more units would be beneficial, as it leads to increased profits. Conversely, if marginal revenue falls below marginal cost, the firm may consider reducing output to enhance profitability.

Total revenue represents the overall income from sales before costs are deducted; net revenue is what remains after all expenses have been accounted for; and gross revenue refers to the total amount earned from sales without adjusting for any expenses. While these terms are related to revenue generation, they do not specifically define the revenue earned from the sale of each additional unit, which is why marginal revenue is the most accurate answer.