Identify an Advantage of Adopting a Low Minimum Efficient Scale

question 56

Multiple Choice

Identify an advantage of adopting a low minimum efficient scale.

• A) It helps companies reduce the level of initial capital required for business.
• B) It allows the firm to accommodate demands for local responsiveness.
• C) It allows firms discount political risks and other global capital risks.
• D) A minimum efficient scale of a plant allows decentralization of production.

---

Definitions:

Profit-maximizing Output

The level of production at which a firm achieves the highest profit, where marginal revenue equals marginal cost.

Marginal Cost

The expenditure required to produce an extra unit of a good or service.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced.

Lawn-mowing

The process of cutting the grass in a lawn to maintain its appearance and health.