In which if the following situations would consideration of the minimum efficien
ID: 2378366 • Letter: I
Question
In which if the following situations would consideration of the minimum efficient scale of operation suggest that the market should be served by large number of small firms to minimize production costs?
A When the LRAC curve is U-shaped and the demand for output is relatively small
b When the LRAC curve is sloped downward over the relevant range of output
C When the LRAC curve hits it minimum point at a relatively low level of out put and then increases and the demand for output is quite large
d When the LRAC curve initially increases and then decreases beyond some point.
Explanation / Answer
When the LRAC curve hits its minimum point at a relatively low level of output and then increases and the demand for output is quite large