A firm's efficient scale of production is the output at which its
A) marginal cost is at a minimum.
B) average total cost is at a minimum.
C) profit is maximized.
D) marginal revenue is at a maximum.
E) marginal revenue equals marginal cost.

Question

Quizplus · Accepted Answer

The efficient scale of production is the output level where average total cost is at a minimum. At this point, the firm is producing at the lowest possible cost per unit, which maximizes its profits. Option A is incorrect because although marginal cost is an important factor in determining output level, it is not the determining factor.  Option C is incorrect as profit is maximized where marginal revenue is equal to marginal cost, but the question is specifically asking for the efficient scale of production. Option D is incorrect because marginal revenue may not be at a maximum at the efficient scale of production. Option E is incorrect because the efficient scale of production is not dependent on marginal revenue being equal to marginal cost.

A Firm's Efficient Scale of Production Is the Output at Which