When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

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Quizplus · Accepted Answer

In this scenario, the firm's minimum efficient scale is 3,000-4,000 units. Minimum efficient scale (MES) is the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

When a Firm Manufactures 2,000-3,000 Units of a Product, It