10 Questions
What does the Minimum Efficient Scale (MES) represent?
A measure of output
What happens to the number of firms in the market when the MES increases?
The number of firms decreases
Why do smaller businesses face a barrier to entry in a market with high MES?
They lack the finance to increase their scale of production
What happens to a firm's LRAC curve when it operates below its MES?
It increases
What happens to a firm's output when it operates above its MES?
It decreases
What is the MES in perfect competition?
Low levels of output
What is the impact of MES on the degree of competition in the market?
It increases competition
Why do industries like hairdressing have a low MES?
They require low technology
What is the relationship between MES and market size?
MES is directly proportional to market size
What is the LRAC curve at the MES?
At its lowest point
Understand how firms grow through organic growth, mergers, and takeovers, and analyze their profit maximization objectives in different market structures.
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