Assume That the Minimum Efficient Scale for a Typical Firm

question 24

Multiple Choice

Assume that the minimum efficient scale for a typical firm in an industry is 2 million units. The estimated output for the whole industry is 6 million units. Therefore, one can conclude that:

• A) the industry is a natural monopoly.
• B) the output produced in the industry is less than the perfectly competitive output.
• C) the industry experiences increasing returns to scale.
• D) the industry is likely to support 3 firms, each producing at minimum efficient scale.
• E) the price in the industry is higher than the perfectly competitive price.

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