What does the term "minimum efficient scale" mean?
A)The smallest size a firm can be in order to minimize both short-run and long-run average costs.
B)The smallest size a firm can be in order to minimize short-run marginal cost.
C)The smallest size a firm can be in order to minimize short-run average cost.
D)The smallest size a firm can be in order to minimize long-run marginal cost.
E)The smallest size a firm can be in order to minimize both short-run and long-run marginal cost.

Question

Quizplus · Accepted Answer

Minimum efficient scale is the smallest size a firm can be in order to minimize both short-run and long-run average costs. This means that if a firm produces at a level below its minimum efficient scale, it will not be operating at its lowest possible cost, resulting in inefficiencies. Therefore, it is important for a firm to identify its minimum efficient scale in order to achieve cost efficiency and competitiveness in the market.

What Does the Term "Minimum Efficient Scale" Mean