Minimum+Efficient+Scale

Minimum efficient scale is the lowest level of output at which a firm's long-run average total cost is at a minimum. Basically, it refers to the point on the Long-run-average-total-cost curve (LRATC) where the economies of scale meets the diseconomies of scale, or where the economies of scale meets the constant if there is one. It is where the total costs are as low as they can be, and thus where the company the most the efficient and wants to be at.

DIfferent industries will varry in their LRATC curve and some curves will have a long constant at the bottom of the curve. On that constant, there can be multiple firms producing product at the same point where the total costs are at the minimum, they would only differ in how much quantity they produce. For example you can compare my local coffee shop to Starbucks. Both firms would produce the coffee at the cheapest cost which is one dollar, but Starbucks would produce more just because it's bigger.

[|กาแฟวิงค์ไวท์] In the film "You've Got Mail," Tom Hanks owns a large bookstore chain while Meg Ryan owns a small local bookstore right down the street. These stores are selling the same products at the cheapest cost possible, but the large bookstore chain will sell more because it's bigger. Although these companies differ in size, they are both at the minimum efficient point, meaning they both have their Total Costs down as low as they can be.

media type="youtube" key="bNjOOEulPKk" height="344" width="425" This video is an example of a smaller local coffee shop that is minimumly efficient. Although it must compete with big chains like Starbucks, they produce generally the same products (various coffee items) at very similar, if not the same, prices. These companies may be completely different sizes, but since they're both producing at the lowest level of output and their ATC is at a minimum in the long-run, both The Copy Cup and Starbucks are minimumly efficient. Both The Coffee Cup and Starbucks can co-exist on the same market, Starbucks will make more money only because they sell more than The Coffee Cup.

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Question: Where is the minimum efficient scale on a graph? a) any point during economies of scale b) any point during diseconomies of scale c) the point where the economies of scale meets diseconomies of scale d) what are you talking about? e) right next to No-Shave-November, don't choose (e), this isn't the answer

Answer: c