When the Minimum Efficient Scale Occurs at a High Level

question 383

Multiple Choice

When the minimum efficient scale occurs at a high level of industry output

• A) the firms in the industry will be producing in the diseconomies of scale portion of the curve.
• B) there will only be a few firms in the industry.
• C) the government will have to take over the production of the good since it will be unprofitable for firms.
• D) there will be a lot of firms in this industry.

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Definitions:

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment leases.

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced.

Earnings Before Taxes

A financial metric indicating the profit earned by a business before the deduction of tax expenses.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.