If Economies of Scale Are Significant, the Typical Firm Will

question 145

True/False

If economies of scale are significant, the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

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Definitions:

Excess Capacity

A situation where a company or economy can produce more goods or services than currently demanded, often leading to inefficiency and lower prices.

Excess Capacity

A scenario where a firm or industry has unused production resources, leading to inefficiencies and lowered profitability.

Productive Inefficiency

A situation where resources are not used in the most cost-effective way, resulting in a higher production cost than necessary.

Allocative Inefficiency

A situation where resources are not allocated efficiently, leading to a mismatch between what is produced and what consumers actually demand, causing wastage and loss of potential welfare.