When a firm is at its minimum efficient scale of operation, it produces the
A) maximum rate of output at which long-run average cost is minimized.
B) minimum rate of output at which long-run average cost is minimized.
C) maximum rate of output consistent with lowest long-run marginal cost.
D) minimum rate of output consistent with lowest long-run marginal cost.

Question

Quizplus · Accepted Answer

When a firm is at its minimum efficient scale, it produces the minimum rate of output at which long-run average cost is minimized. This means that the firm is producing at the optimal size where it is achieving the lowest average cost per unit of output. At this level of production, the firm is able to take advantage of economies of scale and operate efficiently, while avoiding diseconomies of scale that may occur at larger production levels.

When a Firm Is at Its Minimum Efficient Scale of Operation