Question 1

The lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum defines
A)maximum efficient scale.
B)minimum efficient scale.
C)allowable efficient scale.
D)short-run efficient scale.

Accepted Answer

The minimum efficient scale is the lowest level of production a firm can achieve while still taking full advantage of economies of scale and achieving the lowest long-run average costs possible. This is because, below this level, the firm would not be able to spread its fixed costs over enough units of output, leading to higher costs per unit. Therefore, option B correctly defines the lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum.

Question 2

What is minimum efficient scale? Why is it important?

Accepted Answer

The answer of What is minimum efficient scale? Why is...

Question 3

The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum is
A)economies of scale.
B)diseconomies of scale.
C)constant returns of scale.
D)minimum efficient scale.

Accepted Answer

The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum is referred to as the minimum efficient scale. At this scale, the firm is producing at the lowest possible cost per unit of output. Choices A, B, and C are not correct because they do not accurately describe this concept.

Question 4

"If an industry's minimum efficient scale is between 2,000 and 4,000 units of output,then a firm producing 2,000 units of output in that industry has a cost-saving advantage over another firm producing 4,000 units of output in the same industry." Do you agree or disagree? Explain.

Accepted Answer

The answer of "If an industry's minimum efficient scale is...

Question 5

The minimum efficient scale in the figure below shows that 
A)point A is the minimum efficient scale (MES)for the firm.
B)point B is the minimum efficient scale (MES)for the firm.
C)the long-run average cost curve (LAC)reaches a minimum point at B.
D)the minimum efficient scale (MES)illustrates maximum average costs.

Accepted Answer

The answer of The minimum efficient scale in the figure...

Question 6

When the minimum efficient scale occurs at a high level of industry output
A)the firms in the industry will be producing in the diseconomies of scale portion of the curve.
B)there will only be a few firms in the industry.
C)the government will have to take over the production of the good since it will be unprofitable for firms.
D)there will be a lot of firms in this industry.

Accepted Answer

If the minimum efficient scale occurs at a high level of industry output, it means that the industry is characterized by economies of scale over a large range of output. This implies that it is more efficient for a few firms to produce the good rather than many small firms. Therefore, there will only be a few firms in the industry.

Question 7

For an industry in which average costs continue to decline as output rises,what would you expect the minimum efficient scale to be? Explain your answer.

Accepted Answer

The answer of For an industry in which average costs...

Quiz 9: The Firm: Cost and Output Determination

The lowest rate of output per unit of time at which long-run average costs for a firm are at a minimum defines

What is minimum efficient scale? Why is it important?

The lowest rate of output per unit of time at which long-run average costs for a particular firm are at a minimum is

"If an industry's minimum efficient scale is between 2,000 and 4,000 units of output,then a firm producing 2,000 units of output in that industry has a cost-saving advantage over another firm producing 4,000 units of output in the same industry." Do you agree or disagree? Explain.

The minimum efficient scale in the figure below shows that

When the minimum efficient scale occurs at a high level of industry output

For an industry in which average costs continue to decline as output rises,what would you expect the minimum efficient scale to be? Explain your answer.