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.
