If Minimum Efficient Scale Is Small Relative to the Maximum

question 82

Multiple Choice

If minimum efficient scale is small relative to the maximum potential market,

• A)relatively large firms will have a cost advantage over relatively small firms
• B)the market price will be low
• C)relatively small firms will have a cost advantage over relatively large firms
• D)the market price will be high
• E)only one firm will survive in the long run.

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Definitions:

Purely Competitive

An economic market structure characterized by many buyers and sellers, homogeneous products, and no single participant having a significant influence on price.

Wage Rate

The amount of compensation a worker receives per unit of time (e.g., hour, day) or per task completed.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production.

Purely Competitive

A market structure characterized by many sellers offering identical products, leading to a high degree of competition.