The "minimum efficient scale" of operation in an industry is defined as:
A)the smallest plant size that can be operated by firms in the industry.
B)the scale of operation at which economies of scale are exhausted.
C)the smallest number of firms that could effectively meet demand for an industry's output.
D)the scale of operation by firms in an industry that is least efficient.

Question

Quizplus · Accepted Answer

The minimum efficient scale of operation in an industry refers to the point at which economies of scale are exhausted, and further increases in scale do not result in lower costs per unit of output. In other words, it is the scale of operation at which firms can produce at the lowest possible average cost. Option A is incorrect because the minimum efficient scale may vary depending on the industry and technology used. Option C is incorrect because the number of firms in an industry is not necessarily related to the minimum efficient scale. Option D is incorrect because the minimum efficient scale represents the most efficient scale of operation for firms in an industry.

The "Minimum Efficient Scale" of Operation in an Industry Is