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:

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing American monetary policy and financial system regulation.

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Occurrences when a bank is unable to meet its obligations to depositors or creditors and ceases operations, often resulting in regulators seizing the institution.

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A severe worldwide economic downturn that took place during the 1930s, marked by massive unemployment and widespread poverty.

Lost Confidence

A situation where consumers or investors become pessimistic about the economic prospects, leading to reduced spending and investment.