Question

Which of the following firms produce at the efficient scale​? A. Toyota produces 20 cars a day at its Texas plant at which its profit is maximized. B. Dell produces 100 computers a week at which its average total cost is minimized. C. ​Starbucks' makes 1000 chai lattes each day at which is total revenue is maximized. D. A Gap outlet in Chicago sells 500 jackets a day and lowers its average variable cost.

Answer 1

Answer: The answer is option B. Dell produces 100 computers a week at which its average total cost is minimized.

Explanation: Efficient scale of production, otherwise known as the minimum efficient scale (MES), is the lowest point at which an organization (or firm) can produce in a way that its long run average total costs are minimized.

In other words, we can simply define it as the lowest point on a cost curve at which a company or firm can produce its product at a price that is competitive.

At the efficient scale point, the organization will achieve the economies of scale that is necessary for it to effectively compete in its industry.

Therefore, the minimized production cost at which Dell can effectively compete in its industry is 100 computers a week.