The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, then the company:
A)is experiencing economies of scale.
B)is operating at its minimum efficient scale.
C)is experiencing increasing returns to scale.
D)will shut down.
E)is experiencing diseconomies of scale.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, then the company:
A)is experiencing economies of scale. 
B)is operating at its minimum efficient scale. 
C)is experiencing increasing returns to scale. 
D)will shut down. 
E)is experiencing diseconomies of scale.

Quizplus · Accepted Answer

When a firm is producing at the minimum point of the long-run average-total-cost (LRATC) curve, it is operating at its minimum efficient scale (MES). This means that the firm is producing at the optimal level of output, where it is experiencing neither economies of scale nor diseconomies of scale. Therefore, the correct answer is B, the firm is operating at its minimum efficient scale.

The Figure Given Below Shows Three Short Run Average Total