Can someone please explain me the concept of Marginal Revenue Product, I dont know what is happening, I am not being able to understand the basic concept in this, please help me out!

If you spend $1.00 on a given input, the amount by which that will increase your output is the marginal revenue product. Maybe if you add $1.00 of labor you’ll increase your output by $2.00 (MRP = 2.0), but if you add $1.00 of technology you’ll increase your output by only $1.50 (MRP = 1.5).

To maximize your output (and revenue), you want the marginal revenue product to be the same for all inputs. In the example above, you need to add more labor (whose MRP is higher) until its MRP drops to 1.5.

thank you sir, you are awesome! (y)

My pleasure.

Awesome S2000magician sir


Marginal revenue product is the additional revenue generated by the extra output from employing one more unit of a factor of production.

For example - If ATC is $40 and output is $60 and here you are employing $1 extra input and generating $3 extra(MRP).Then the final result is ATC $41 and output is $63.

$3 is Marginal revenue product generated by employing $1 additional input.