Which of the following correctly defines the minimum efficient scale for a firm?
A) The output level at which the firm earns an abnormal profit
B) The minimum point of the firm's learning or experience curve
C) The lowest output at which minimum average cost can be achieved
D) The output level where average fixed cost is at its minimum point
E) The level of output produced when the firm is operating at full production capacity

Question

Quizplus · Accepted Answer

The minimum efficient scale for a firm is the lowest output at which minimum average cost can be achieved. This is because at this output level, the firm is able to spread its fixed costs over a larger quantity of output, leading to lower average costs per unit. Once the firm reaches this minimum efficient scale, any further increases in output would result in higher average costs per unit. The other choices do not accurately define the minimum efficient scale.

Which of the Following Correctly Defines the Minimum Efficient Scale