Question

1. The minimum efficient scale is important in determining:

A) the output elasticity of firms in the market. B) the allocation of output between the multiple plants owned by a firm. C) whether the firm’s production function exhibits increasing, constant, or decreasing returns to scale. D) the optimum level of input usage by a firm. E) how many firms can profitably operate in a particular market.

2. Assume that in an industry, the typical firm reaches its minimum average cost at 200,000 million units. The estimated output for the whole industry is 6 million units. Therefore, one can conclude that:

A) the industry experiences increasing returns to scale. B )the output produced in the industry is less than the perfectly competitive output. C) the industry is a natural monopoly. D) the industry is likely to support 30 firms, each producing at minimum cost. E) the price in the industry is higher than the perfectly competitive price.

Answer 1