A firm's long-run average total cost curve is shown in this figure:

Which quantity is this firm's minimum efficient scale (MES)?

Choose 1 answer:
(A) Q4
(B) $\mathrm{Q} 2$
(c) Q3
(D) $\mathrm{Q} 1$

Question

A firm's long-run average total cost curve is shown in this figure:

Which quantity is this firm's minimum efficient scale (MES)?

Choose 1 answer:
(A) Q4
(B) $\mathrm{Q} 2$
(c) Q3
(D) $\mathrm{Q} 1$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Minimum Efficient Scale (MES): The MES is the smallest quantity of output at which a firm can achieve the lowest long-run average total cost (LRATC). ‖ ‖ b ⋮ Identifying MES on the Graph: The MES corresponds to the quantity at the lowest point of the U-shaped LRATC curve. ‖ ‖ c ⋮ Analyzing the Graph: From the provided graph, the lowest point of the LRATC curve is at Q3. ‖ ∻Answer∻ ⚹ Q3 ⚹ ∻Key Concept∻ ⚹ Minimum Efficient Scale (MES) ⚹ ∻Explanation∻ ⚹ The MES is the output level at which the firm achieves the lowest possible long-run average total cost. In the provided graph, this occurs at Q3, where the LRATC curve reaches its minimum point. ⚹◊What factors contribute to the firm's minimum efficient scale (MES) in the long run average total cost curve?⍭ Generate me a similar question◊

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