When a Firm Is at Its Minimum Efficient Scale of Operation

question 163

Multiple Choice

When a firm is at its minimum efficient scale of operation, it produces the

• A) maximum rate of output at which long-run average cost is minimized.
• B) minimum rate of output at which long-run average cost is minimized.
• C) maximum rate of output consistent with lowest long-run marginal cost.
• D) minimum rate of output consistent with lowest long-run marginal cost.

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Definitions:

Variable Cost

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

Selling and Administrative Costs

Expenses related directly to the marketing and management of a company, excluding costs associated with the production or purchase of goods.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit.

Product Cost

The total cost associated with making or acquiring a product, including materials, labor, and overhead costs.