For a firm in monopolistic competition,the efficient scale is the amount of output at which ________ is a minimum.
A) fixed cost
B) average total cost
C) average variable cost
D) average fixed cost
E) marginal cost

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have a downward sloping demand curve due to product differentiation. Therefore, firms can only produce a smaller amount of output compared to perfectly competitive markets where firms have a horizontal demand curve. As a result, the efficient scale is the amount of output where average total cost is a minimum, as it reflects the lowest per-unit cost of production. At this point, the firm is producing at the lowest possible cost without sacrificing quality, which is important in monopolistic competition where product differentiation affects consumer demand.

For a Firm in Monopolistic Competition,the Efficient Scale Is the Amount