When a firm is no longer able to reduce its long-run average cost by expanding, it has achieved its minimum efficient scale of production.

Question

Quizplus · Accepted Answer

The minimum efficient scale (MES) of production is the level of output at which a firm achieves the lowest possible long-run average cost. At the MES, the firm has fully exploited economies of scale and cannot reduce costs any further by expanding its operations. Therefore, the statement is true.

When a Firm Is No Longer Able to Reduce Its