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Firm Growth and Market Structures

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Questions and Answers

What does the Minimum Efficient Scale (MES) represent?

A measure of output (correct)

A measure of profit

A measure of cost

A measure of market size

What happens to the number of firms in the market when the MES increases?

The number of firms oscillates

The number of firms decreases (correct)

The number of firms remains constant

The number of firms increases

Why do smaller businesses face a barrier to entry in a market with high MES?

They lack the skilled labor to compete

They lack the technology to compete

They lack the market knowledge to compete

They lack the finance to increase their scale of production (correct)

What happens to a firm's LRAC curve when it operates below its MES?

It increases Signup and view all the answers

What happens to a firm's output when it operates above its MES?

It decreases Signup and view all the answers

What is the MES in perfect competition?

Low levels of output Signup and view all the answers

What is the impact of MES on the degree of competition in the market?

It increases competition Signup and view all the answers

Why do industries like hairdressing have a low MES?

They require low technology Signup and view all the answers

What is the relationship between MES and market size?

MES is directly proportional to market size Signup and view all the answers

What is the LRAC curve at the MES?

At its lowest point Signup and view all the answers