If the "minimum efficient scale" in an industry is at 25 percent of market sales, what is the maximum number of efficient firms the economy can support in this industry?
A)75
B)25
C)10
D)4

Question

Quizplus · Accepted Answer

The minimum efficient scale is the smallest scale at which a firm can produce its product at a minimum long-run average cost. If the minimum efficient scale is 25% of market sales, it means that a firm must produce at least 25% of the total market sales to achieve the lowest costs. Therefore, the maximum number of such firms that the market can support without any of them producing below this scale is 4 (100% / 25% = 4).

If the "Minimum Efficient Scale" in an Industry Is at 25