Question

Which of the following statements about U.S. agriculture is true as it relates to the past several decades?

		The prices of farm products have increased, minimum efficient scale has declined, and the supply of farm products has been stagnant.
		Minimum efficient scale has increased, the prices of farm products have declined, and the number of farms has declined.
		The demand for farm products has become both more income elastic and more price elastic.
		The demand for farm products has declined, the supply of farm products has increased, and the price of farm products has declined.

Answer 1

The answer is: Minimum efficient scale has increased, the prices of farm products have declined, and the number of farms has declined.

A firm’s minimum efficient scale (MES) is the lowest scale necessary for it to achieve the economies of scale required to operate efficiently and competitively in its industry. No further significant economies of scale can be achieved beyond this scale. The minimum efficient scale affects the number of firms that can operate in a market and the structure of markets.

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