If the Minimum Efficient Scale in Microwave Oven Production Is

question 161

Multiple Choice

If the minimum efficient scale in microwave oven production is 100,000 units per year,it implies that _____

• A)the average cost of producing 50,000 microwave ovens is greater than the average cost of producing 100,000 microwave ovens.
• B)the average cost of producing 50,000 microwave ovens is equal to the average cost of producing 100,000 microwave ovens.
• C)the total cost of producing 50,000 microwave ovens is greater than the total cost of producing 100,000 microwave ovens.
• D)the firm should not produce more than 50,000 microwave ovens.
• E)marginal cost exceeds average cost at 100,000 microwave ovens.

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Definitions:

Pure Monopoly

A market structure where a single seller controls the entire supply of a product or service, with no close substitutes available.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, leading to some degree of market power in setting prices.

Economies of Scale

A proportionate saving in costs gained by an increased level of production, leading to lower costs per unit as volume increases.

Unit Cost

The expense a company experiences in manufacturing, warehousing, and distributing a single unit of a specific product or service.