Given below are two statements: Assertion (A): Marginal Revenue is the addition to total revenue from selling one more unit of output (MR = ΔTR/ΔY). Reason (R): Total revenue is the amount of money received when the producer sells the product (TR = Y × Py).

Correct option is A

The correct answer is (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

Explanation:
• Assertion (A) is correct: Marginal Revenue (MR) represents the change in total revenue resulting from the sale of an additional unit of output. The formula $MR = \frac{\Delta TR}{\Delta Y}$ correctly captures this incremental change.
• Reason (R) is correct: Total Revenue (TR) is the total receipts a firm receives from selling its products, calculated as the quantity sold (Y) multiplied by the unit price ($P_y$).
• Relationship: The reason explains the assertion because to calculate the change in Total Revenue (MR), one must first understand what Total Revenue (TR) is. Since TR is derived from price and quantity, any change in output affects TR, and the rate of that change is MR. Thus, the definition of TR provides the necessary foundation for the concept of MR.

Information Booster:
• Under perfect competition, Price ($P$) = Average Revenue ($AR$) = Marginal Revenue ($MR$).
• In a monopoly, $MR$ is always less than the price ($P$) for any unit after the first.
• Profit maximization occurs at the point where $MR = MC$ (Marginal Cost).

Additional Knowledge:
• $TR = P \times Q$: This is the fundamental revenue function in microeconomics.
• $MR$ is the derivative of the $TR$ function with respect to quantity ($dTR/dQ$).