The efficient scale occurs when the firm's:

Question

Quizplus · Accepted Answer

The efficient scale occurs when a firm produces at the minimum point of its average total cost curve (ATC). At this point, the firm is able to produce at the lowest cost possible, making it efficient. If the firm produces beyond the efficient scale, the ATC will start to increase, resulting in inefficiency. Therefore, at the efficient scale, the average revenue (AR) must be equal to the minimum point of the ATC. This is because if the AR is less than the minimum point of the ATC, the firm will be making a loss; and if the AR is greater than the minimum point of the ATC, the firm is not producing at the lowest cost possible, making it inefficient.

The Efficient Scale Occurs When the Firm's