Calculate marginal revenue product (MRP) by multiplying marginal product by marginal revenue or output price, or solve for either factor from a known MRP.

Use one consistent time period. For labor, one input unit is one worker (or hour) over that period.

Extra output from one more worker or input unit: change in output ÷ change in input.

For a firm in a competitive market (a price taker), enter the output price.

Optional settings

Starting with total output and worker counts? Use the Marginal Product Calculator to calculate MRP from worker counts or a production table. Choose Workers as the input unit, enter two points or a production schedule, and supply Price per output unit in the optional section. To find the fifth worker’s MRP, compare four workers with five; the schedule reports MRP for its latest interval. Use output totals from the same period and an unchanged selling price. An interval covering several added workers gives an average per worker.

MRP Formula

The following formula is used to calculate the total marginal revenue product:

MRP = MPP × MR
  • Where MRP is marginal revenue product (USD per unit of input, such as one additional worker over a stated period)
  • MPP is the change in output per additional unit of input, measured over the same period
  • MR is marginal revenue per additional output unit (USD/output unit)

In this formula, to explain MPP further, if a business is looking to hire one additional person, and that person will be able to produce 300 units of product, then the MPP is equal to 300.

If the seller is a price taker and can sell the additional output at an unchanged price, that unit price equals marginal revenue per output unit. Otherwise, use the actual change in total revenue per additional output unit.

MRP Definition

What is MRP?

MRP, short for marginal revenue product, is a measure of how much additional revenue is gained from the hiring of one unit of labor. In other words, how much revenue will be generated if a company hires one worker?

Example Problem

How to calculate MRP?

  1. First, determine the total number of units one worker can produce.

    For this example, we will use the same number of units as above and assume the worker will produce an additional 300 units. The amount the worker produced could be per any unit of time (day/year/month, etc.).

  2. Next, determine the marginal revenue of the product.

    In this case, the revenue generated by each unit is known to be $20.00.

  3. Finally, calculate the total marginal revenue product.

    Using the formula above, the MRP is calculated to be:
    MRP = MPP * MR
    MRP = 300 * 20
    MRP = $6,000.00