A single-plant firm trying to select the rate of output consistent with an overall plant size that yields the minimum efficient scale will choose a rate of output for which
A) the short-run marginal cost curve crosses the short-run average total cost curve at that rate of output.
B) the long-run marginal cost curve crosses the long-run average fixed cost curve at that rate of output.
C) long-run average total cost is lowest at that rate of output.
D) total fixed costs are minimized at that rate of output.

Question

Quizplus · Accepted Answer

The minimum efficient scale occurs when the firm produces at the rate where long-run average total cost is at its lowest. This means that the firm is able to produce at the most efficient rate for its size, minimizing costs and maximizing profits. Therefore, option C is the correct choice. Options A and B are incorrect as they refer to short-run costs, which may not necessarily be indicative of long-term efficiency. Option D is also incorrect as total fixed costs are not directly related to the rate of output.

A Single-Plant Firm Trying to Select the Rate of Output