Economies and diseconomies of scale pt3

Question 1

MES

Answer 1

The Minimum efficiency scale is the lowest level of output at which the minimum possible AC (on LRAC) can be achieved.

Question 2

MES notes

Answer 2

-LRAC are minimised at MES
-Where the LRAC reaches its minimum value, there is likely an optimised level of production
-If firms are producing at their minimum AC (lowest part of the cost curve), then they are being productively eccicient

Question 3

Returns to scale recap

Answer 3

How much output changes as input is increased

Question 4

Economies of scale recap

Answer 4

How AC’s are reduced as input is increased

Question 5

Link between RTS and EoS

Answer 5

Increased RTS contribute to EoS
Decreased RTS contribute to DoS