If the minimum efficient scale in an industry were smaller than the size of the market of that industry, then we would have a natural-monopoly situation.

Question

Quizplus · Accepted Answer

If the minimum efficient scale in an industry were smaller than the size of the market, then it would not be a natural monopoly situation. A natural monopoly occurs when the minimum efficient scale is larger than the market size, making it economically efficient for only one firm to provide the goods or services.

If the Minimum Efficient Scale in an Industry Were Smaller