A single-plant firm trying to select the rate of output consistent with an overall plant size that yields the minimum efficient scale will choose a rate of output for which
A) the short-run marginal cost curve crosses the short-run average total cost curve at that rate of output.
B) the long-run marginal cost curve crosses the long-run average fixed cost curve at that rate of output.
C) long-run average total cost is lowest at that rate of output.
D) total fixed cots are minimized at that rate of output.

Question

Quizplus · Accepted Answer

The minimum efficient scale refers to the level of production at which the firm achieves the lowest long-run average total cost. Therefore, the single-plant firm would select the rate of output at which the long-run average total cost is lowest, which is option C. Options A and B refer to short-run costs, which may not be at the minimum efficient scale. Option D refers only to fixed costs, which are not necessarily minimized at the minimum efficient scale.

A Single-Plant Firm Trying to Select the Rate of Output