The minimum efficient scale of a firm is the smallest output level at which the firm:
Correct answer: B. Reaches the lowest point of long-run average cost
- A. Begins to experience diseconomies of scale
- B. Reaches the lowest point of long-run average cost
- C. Earns the highest possible short-run profit
- D. Has marginal cost equal to average fixed cost
Explanation
Minimum efficient scale is the lowest output at which long-run average cost is minimized. Producing beyond this point may not lower average cost, although it can still be profitable for other reasons.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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