Question

When a firm is at its minimum efficient scale of operation, it produces the

a. maximum rate of output at which long-run average cost is minimized.
b. minimum rate of output at which long-run average cost is minimized.
c. maximum rate of output consistent with lowest long-run marginal cost.
d. minimum rate of output consistent with lowest long-run marginal cost?

Answer 1

The relation between cost per unit of output and the level of output is captured in the average total cost curve.
When a firm is at its minimum efficient scale of operation, it produces the minimum rate of output at which long-run average cost is minimized. With economies of scale, costs may fall over some ranges of output and rise over other.Correct answer: B