What Is the Relationship Between Marginal Cost and Marginal Revenue?

The relationship between marginal cost and marginal income refers to an important property of marginal cost, that is, when marginal income and marginal cost are equal, the marginal profit is equal to zero, and the enterprise can achieve the most profits. This nature is of great value to business decisions. It is a cost concept commonly used in decision analysis. Many decisions are made based on marginal or differential costs. It can be used to determine whether it is economically advantageous to increase or decrease output. When the enterprise has surplus production capacity, as long as the unit sales price is slightly higher than the unit marginal cost (or unit variable cost), even if it is lower than the total average unit cost, any increase in output is beneficial to the enterprise. When setting the sales price, Marginal cost is an important factor to consider. The rise and fall of the product sales price determines the sales volume of the product. Setting a reasonable price is a very important decision for expanding the market and opening up the market. The purpose of reducing the selling price of enterprises is to expand the sales volume, which is in line with the operating principle of "thin profits but short sales", but there is a "limit" problem of price reduction. Therefore, the concept of marginal cost needs to be applied. When the marginal cost is equal to the marginal income, it is the maximum limit for the decline in sales prices. ^[1]