If the Minimum Efficient Scale of a Firm Is Small

question 310

Multiple Choice

If the minimum efficient scale of a firm is small relative to the demand for the good, then

• A) many small firms can compete in the market.
• B) several large firms will enter the market thereby reducing competition.
• C) there will be no economic profits for any small firms, so no new firms will ever enter the market.
• D) the firms already in the market have lower average total cost than any new firm entering the market.

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Definitions:

Innovation

The process of creating new ideas, products, or methods that bring something new or improved to the market.

Commercialization

The process of bringing new products or services to market, including production, distribution, marketing, and sales strategies.

Efficiency-Enhancing Innovations

Changes to existing products or ideas that make them lower cost.

Market-Creating Innovations

Innovations that generate new markets by fulfilling unmet needs or creating new categories of products or services.