1 Answer | Add Yours
By definition, the answer to this question is B. A plant is at its minimum efficient scale if it produces the quantity of output that gives it the lowest possible long run average costs.
Answer C is clearly wrong because a plant will not want to create diseconomies of scale. Diseconomies of scale occur when a plant gets too big and cannot use its resources as efficiently as it did when it was producing on a smaller scale.
However, A could also be a correct answer here. The lowest possible long run average costs are achieved when a plant avoids diminishing returns to scale.
The best answer, then, would be a fourth option which said that both A and B are correct.
We’ve answered 319,816 questions. We can answer yours, too.Ask a question