Advanced English Dialogue for Business – Marginal revenue

Listen to a Business English Dialogue About Marginal revenue

Patrick: Hey, Audrey, have you heard about marginal revenue in business?

Audrey: Yeah, I think it’s the additional revenue a company earns from selling one more unit of a product or service.

Patrick: That’s correct. It helps businesses understand how their revenue changes as they produce and sell more units.

Audrey: So, how is marginal revenue different from total revenue?

Patrick: Total revenue is the overall income a company generates from all sales, while marginal revenue focuses on the revenue generated by the last unit sold.

Audrey: Can marginal revenue ever decrease as more units are sold?

Patrick: Yes, it can happen if the price of the product or service needs to be lowered to sell additional units, which might result in lower marginal revenue.

Audrey: How does understanding marginal revenue help businesses make decisions?

Patrick: It helps them determine the optimal level of production and pricing to maximize profits. If marginal revenue exceeds marginal cost, it’s usually beneficial to produce more units.

Audrey: Is there a point where marginal revenue equals marginal cost?

Patrick: Yes, that point is known as the profit-maximizing level of output. It’s where the additional revenue gained from producing one more unit is equal to the additional cost of producing that unit.

Audrey: What happens if marginal revenue is less than marginal cost?

Patrick: In that case, producing additional units would result in a loss, so it’s not economically viable for the business.

Audrey: Thanks for explaining, Patrick. Marginal revenue seems like a crucial concept for businesses to understand.

Patrick: Absolutely, Audrey. It’s a fundamental concept in microeconomics that helps businesses make informed decisions about production and pricing strategies.