Eli Whitney III receives a patent for the rayon gin, a product for which there are no close substitutes.Eli will maximize his profit when

Question

Quizplus · Accepted Answer

In order to maximize profit, Eli Whitney III should produce at the level where Marginal Revenue (MR) equals Marginal Cost (MC). This is because at this level of output, the additional revenue generated from producing an extra unit is exactly equal to the additional cost of producing that extra unit. Therefore, there are no more gains from producing more, and any further production would result in lower profits. MR being maximized (choice A) or greater than MC (choice C) would lead to overproduction and lower profits. On the other hand, if MR is less than MC (choice D), it implies that producing an extra unit will result in a loss, which is not a desirable outcome. Lastly, while P = MR > MC (choice E) is a necessary condition for profit maximization under perfect competition, it is not sufficient, as the optimal level of output also needs to be considered.

Eli Whitney III Receives a Patent for the Rayon Gin