Figure 8-11
Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.The minimum efficient scale of output is reached at what rate of output?

Question

Figure 8-11
  Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.The minimum efficient scale of output is reached at what rate of output?

Quizplus · Accepted Answer

The minimum efficient scale of output is the point where the LRAC curve reaches its lowest point. In Figure 8-11, this occurs at an output rate of 10,000 picture frames, as shown by the intersection of the LRAC curve and the minimum point of the ATC curve for firm size C (ATCc). This is the most efficient scale of production for this firm, meaning that it can produce each unit of output at the lowest possible average cost. Therefore, the best choice is D.

Figure 8-11 Figure 8-11 Illustrates the Long-Run Average Cost Curve