When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale?

Question

Quizplus · Accepted Answer

The firm experiences economies of scale at an output level of 11,000 units. When a firm operates at the minimum efficient scale, the returns to scale are constant. 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 Operates at an Output Level of 9,000