Adam Smith observed that the division of labour is limited by the size of the market.Which one of the following statements is not consistent with this observation?
A)A limited-sized market can prevent firms from achieving economic capacity.
B)A limited-sized market can prevent firms from achieving their minimum efficient scale.
C)A limited-sized market can prevent firms from achieving minimum short-run average cost.
D)A limited-sized market can prevent firms from achieving minimum long-run average cost.
E)A limited-sized market can prevent firms from achieving excess capacity.

Question

Quizplus · Accepted Answer

This statement is not consistent with Adam Smith's observation because a limited-sized market can prevent firms from achieving economic capacity and their minimum efficient scale, as well as their minimum short-run and long-run average costs. However, it may not prevent firms from achieving excess capacity, as they may still be able to produce more than the market demands, resulting in excess inventory or idle capacity.

Adam Smith Observed That the Division of Labour Is Limited