What do economists normally assume to be the goal of a firm?
Economists normally assume that the goal of a firm is to earn: (i) profits as large as possible, even if it means reducing output. (ii) profits as large as possible, even if it means incurring a higher total cost. Let L represent the number of workers hired by a firm, and let Q represent that firm’s quantity of output.
Which of the following can be added to profit to obtain total revenue?
Total cost is correct. This is a correct option because the total revenue obtained by any firm can be calculated by adding total cost to…
When for a firm long run average total cost decreases as the quantity of output increases we have a situation of?
economies of scale
What is a high minimum efficient scale?
The minimum efficient scale (MES) is the lowest point on a cost curve at which a company can produce its product at a competitive price. At the MES point, the company can achieve the economies of scale necessary for it to compete effectively in its industry.
At what level of output is minimum efficient scale realized?
The minimum efficient scale is the lowest output at which the firm can produce at so that long-run average costs are minimized. It is represented by the lowest point on the long run average cost curve.
What are the implications of minimum efficient scale?
Minimum efficient scale affects the number of firms that can operate in a market, and the structure of markets. When minimum efficient scale is low, relative to the size of the whole industry, a large number of firms can operate efficiently, as in the case of most retail businesses, like corner shops and restaurants.
What is the efficient scale of a firm quizlet?
Minimum efficient scale (MES) or efficient scale of production is a term used in industrial organization to denote the smallest output that a plant (or firm) can produce such that its long run average costs are minimized.
What is minimum efficient scale quizlet?
minimum efficient scale is. the level of output at which the long-run average cost of production no longer decreases with output. a firm that does not reach its minimum efficient scale. will lose money if it remains in business.
What is a consequence of a low minimum efficient scale?
Which of the following is a consequence of a low minimum efficient scale? It allows a firm to hedge against currency risk by manufacturing the same product in several locations. A firm with a wide product variety will find it: low cost and product customization.