What Is Marginal Revenue Product?
Marginal revenue product is an economic theory that helps a company determine the amount of money or value earned from producing an additional unit. Economically speaking, companies will set their production output where marginal revenue equals marginal cost. Past this point, the company will lose money on producing additional units. This theory also helps companies calculate the best use of limited economic resources. Using too many resources to produce units indicates high economic waste, driving down the marginal revenue product for goods produced.
