In Which of the Following Situations Would Consideration of the Minimum

question 90

Multiple Choice

In which of the following situations would consideration of the minimum efficient scale of operation suggest that the market should be served by a single firm to minimize production costs?

• A)When the LRAC curve slopes downward over the relevant range of output.
• B)When the LRAC curve hits its minimum point at a relatively low level of output and then increases and the demand for output is quite large.
• C)When the LRAC curve hits its minimum point at a relatively low level of output but then remains constant as the scale of operation is increased and the demand for output is quite large.
• D)When the LRAC curve initially increases and then decreases beyond some point.

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Definitions:

Utility Maximizing

A concept in economics that refers to the idea that individuals choose to allocate their resources in a way that maximizes their utility or satisfaction.

Wage Increase

An upsurge in the rate of pay employees receive for their labor, typically expressed as a percentage increase over current wages.

Substitution Effect

The change in consumption patterns due to a price change, leading consumers to substitute one product for another.

Wage Decrease

A reduction in the hourly, daily, or monthly compensation that workers receive for their labor.