Question

At the minimum efficient​ scale,

A. marginal cost is at its minimum.
B. any increases in the scale of operation will encounter further economies of scale.
C. all possible economies of scale have not been exhausted.
D. the firm has achieved the lowest possible average cost of production.

Answer 1

The correct answer is D. the firm has achieved the lowest possible average cost of production.

Step-by-step explanation:

The minimum efficient scale is called the value of production for which the average long-term cost is minimal and also coincides with the marginal cost.

On the minimum efficient scale it is said that we are in the smallest possible production in which a long-term competitive company would be interested in producing. Below that value, the company would go into losses and should close.

The curve of long-term average costs is obtained from the envelope of the infinite possible curves of short-term average costs for different plant sizes, that is, for different levels of capital. From this envelope, a U-shaped average cost curve is obtained, at which minimum, precisely, the minimum efficient scale is found.