Final answer:
Marginal revenue is the change in total revenue from selling a small amount of additional output. It is affected by selling one additional unit at the new market price and the decrease in price for previous units sold.
Step-by-step explanation:
Marginal revenue is the change in total revenue from selling a small amount of additional output. It is affected by two factors: first, selling one additional unit at the new market price, and second, all the previous units, which were sold at a higher price, now selling for less. This means that the marginal revenue of selling a unit is less than the price of that unit, and the marginal revenue curve is below the demand curve. As output increases, marginal revenue decreases twice as fast as demand.