Assume the LRAC curve for a particular industry hits its minimum point at a relatively low level of output and then increases,and the demand for industry output is quite large.In this case,consideration of the minimum efficient scale of operation suggest that the market should be served by:
A)a large number of small firms to minimize production costs.
B)a small number of large firms to minimize production costs
C)a large number of large firms to minimize production costs.
D)an indeterminate number of firms of indeterminate size to minimize production costs.

Question

Quizplus · Accepted Answer

The minimum efficient scale is reached at a low level of output, suggesting that small firms can achieve low costs. Therefore, a large number of small firms can efficiently serve the market.

Assume the LRAC Curve for a Particular Industry Hits Its