What is minimum efficient scale? What is likely to happen in the long run to firms that do not reach minimum efficient scale?
What will be an ideal response?
Minimum efficient scale is the lowest level of output at which all economies of scale have been exhausted—that is, where the long-run average cost curve stops sloping downward. In the long run, firms that don't reach minimum efficient scale will have higher average costs than competitors that do reach minimum efficient scale, so they will probably be driven out of business. However, firms that justify selling at premium prices due to product differentiation can survive.
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The law of diminishing marginal returns describes changes in output when inputs change
Indicate whether the statement is true or false
Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:
A. the demand for vegetables did not change. B. the market for vegetables is perfectly competitive. C. the market demand for vegetables is perfectly inelastic. D. the demand for vegetables increased this year.
Higher costs result from a currency union when:
A) nations are economically dissimilar so that demand shocks affect each economy asymmetrically. B) nations are economically similar so that demand shocks affect each economy symmetrically. C) there is intense competition between the economies. D) the currency is pegged to the U.S. dollar.
If consumer preference for a product increases, this will cause the equilibrium price of the product to go down, and the equilibrium quantity of the product to go up.
Answer the following statement true (T) or false (F)