For example, the total cost of producing 100 units of a good is $200. The total cost of producing 101 units is $204.

For example, the total cost of producing 100 units of a good is $200. The total cost of producing 101 units is $204. The average cost of producing 100 units is $2, or $200/100; however, the marginal cost for producing the 101st unit is $4, or ($204 - $200)/(101-100).

The marginal revenue measures th