Final answer:
The statement about marginal revenue is true. Marginal revenue is the additional revenue that a company gains from selling one more unit of a product. It varies depending on the market structure and is a key factor in determining the profit-maximizing level of output for a company.
Step-by-step explanation:
The statement that the change in total revenue from selling one additional unit of output is marginal revenue is true. Marginal revenue represents the additional income generated from the sale of one more unit of a good or service. It is a crucial concept in business and economics that helps firms make decisions about production and pricing.
For competitive firms, positive marginal revenue is usually equal to the market price because each additional unit of product sold adds exactly the price of the product to total revenue. However, under monopolistic competition, this scenario changes. As a monopolist sells more units, they often have to lower the price of their product to sell additional units, which can lead to a decrease in total revenue despite selling more. This is due to the fact that the additional revenue from the last unit sold is outweighed by the revenue lost from having to lower the price on all prior units sold, potentially resulting in negative marginal revenue.
To maximize profits, a business will produce up to the point where marginal revenue equals marginal cost, because beyond this point, the cost of producing an additional unit exceeds the revenue generated, thus reducing total profits.