The minimum efficient scale is the smallest quantity of output at which
A)the long-run average cost curve reaches its lowest level.
B)the average total cost curve reaches its lowest level.
C)the average fixed cost curve reaches its lowest level.
D)economies of scale begin.
E)diminishing returns begin.

Question

Quizplus · Accepted Answer

The minimum efficient scale is the smallest quantity of output at which the long-run average cost curve reaches its lowest level. This is because at the minimum efficient scale, the firm is able to take advantage of economies of scale, which lead to lower long-run average costs. Beyond this level of output, the firm may experience diseconomies of scale, which would cause long-run average costs to increase. Therefore, the minimum efficient scale is the optimal level of output for the firm to operate at in the long run.

The Minimum Efficient Scale Is the Smallest Quantity of Output