3.3.3 minimum efficient scale

Question 1

What is the Minimum Efficient Scale (MES)?

Answer 1

• The MES is the level of production where a firm achieves the lowest cost per unit.
• At this point, economies of scale are fully realized, and further growth could lead to diseconomies of scale.

Question 2

Why is MES important for competitiveness?

Answer 2

A firm at or near its MES can produce goods at the lowest cost, making it more competitive in the market.

Question 3

What happens if a firm operates below or above MES?

Answer 3

• Below MES: Higher production costs make it hard to compete.
• Above MES: Leads to inefficiencies and increased costs.