If minimum efficient scale is small relative to the maximum potential market,
A)relatively large firms will have a cost advantage over relatively small firms
B)the market price will be low
C)relatively small firms will have a cost advantage over relatively large firms
D)the market price will be high
E)only one firm will survive in the long run.

Question

Quizplus · Accepted Answer

If the minimum efficient scale is small relative to the maximum potential market, it means that small firms can achieve economies of scale without having to produce at a large scale. Therefore, relatively small firms will have a cost advantage over relatively large firms, which will lead to a more competitive market with lower prices.

If Minimum Efficient Scale Is Small Relative to the Maximum