The minimum efficient scale of a plant is one that? a)avoids diminishing returns b)minimizes long run average costs c)creates diseconomies of scale  

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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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.

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