What is marginal revenue? or marginal cost? what is marginal?

Marginal revenue is the increase in revenue to the firm of selling one more additional unit of product. In a perfectly competitive market, the marginal revenue is usually equal to the unit price. In a monopolistic market, usually the marginal revenue decreases with each additional unit sold. It's dependent on the demand elasticity for the product. Most firms will produce units of product up to the point where MR=MC. In a situation where MR=MC there is no further incentive for the firm to produce and sell additional units as the profit is essentially zero. MC is equal to the sum of all additional costs incurred to produce the next unit of product, which usually means that it will be equal to the increase in variable costs incurred. Let's say you produce toys. You pay $10/month in rent for your factory and the cost of materials, labor, etc. to produce one toy totals $20/toy. The rent is your only fixed cost and all other costs are variable on production levels (# of toys produced). Your marginal cost in this scenario is $20/unit since your MC=VC. Let's say you sell your toy for $25/toy. Under this scenario, you maximize profit by producing and selling as many units as you possibly can as long as your marginal costs do not increase and you can continue to sell the product at the $25 price, which is your marginal revenue. As you can probably tell, this is not reality. While you may be able to keep your MC at $20/unit, chances are once the market has been flooded with your toys (everyone owns one) no one will pay the $25 price for the toy. You can drop your price (i.e. MR), but once you reach the break-even point where MR=MC there's really no incentive to produce that one additional unit anymore as the revenue received only equals the cost you incurred to produce it, and profit incentives are lost. Make sense?