Question

Choose the correct statement. A. A​ firm's minimum efficient scale is the smallest quantity of output at which​ long-run average cost reaches its lowest level. B. A​ firm's minimum efficient scale increases when the number of people employed increases. C. At outputs greater than the minimum efficient​ scale, a firm experiences economies of scale. D. At outputs less than the minimum efficient​ scale, a firm experiences diseconomies of scale.

Answer 1

The correct statement is A, which explains that a firm's minimum efficient scale is the smallest quantity of output at which the long-run average cost is at its lowest.

Step-by-step explanation:

The correct statement is A. A​ firm's minimum efficient scale is the smallest quantity of output at which​ long-run average cost reaches its lowest level. This concept is central in understanding the economies of scale, where as the quantity of output increases, the cost per unit decreases. It is an important factor in deciding the optimal scale of production for a company. Contrary to statement B, an increase in the number of people employed does not necessarily lead to an increase in a firm's minimum efficient scale. Statement C is incorrect because at outputs greater than the minimum efficient​ scale, a firm can potentially experience diseconomies of scale, where average costs start to increase. Finally, statement D is incorrect as at outputs less than the minimum efficient​ scale, a firm does not experience diseconomies of scale; it is still in the phase of economies of scale where costs per unit can decrease as production increases.