ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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internal economies of scale has been fully exploited
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external economies of scale has been fully exploited
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LRAC is at its lowest
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internal economies of scale has been fully exploited
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None of the above
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Detailed explanation-1: -The minimum efficient scale (MES) is the balance point at which a company can produce goods at a competitive price. Achieving MES minimizes long-run average total cost (LRATC). The MES is the point on a company’s long-run average cost curve where economies of scale have been exhausted, and constant returns have begun.
Detailed explanation-2: -Minimum efficient scale (MES) is the quantity at which a firm’s long run average total cost curve stops falling, and the size of a firm’s MES relative to the size of the market has a strong influence on market structure-large MES is associated with more concentrated markets.
Detailed explanation-3: -Relationship to market structure For instance, if the minimum efficient scale is small relative to the overall size of the market (demand for the good), there will be a large number of firms. The firms in this market will be likely to behave in a perfectly competitive manner due to the large number of competitors.
Detailed explanation-4: -Minimum efficient scale corresponds to the lowest point on the long run average cost curve and is also known as an output range over which a business achieves productive efficiency.
Detailed explanation-5: -If minimum efficient scale occurs at a high enough output, there will be a natural monopoly.