Question

Size of the firm is closely related to the competitiveness of the firm, particularly in a global market. Using the concept of minimum efficient scale (MES) at long-run average cost curve, explain why firms in some industries have relatively strong market power and this power enables them to set the price more strategically than firms in other industries.

Answer 1

Firms have strong market power as due to minimum efficiency scales, the long run average costs are minimised and helps stronger thicker profits for firms. These profits help in capital expansion and aggresive distribution to penetrate markets and thus develop higher customer market share and revenue market shares.

This leads to lower competing firms and leads them to seizures and clsoures and ultimately consolidation or kerger acquisition with larger firms and thus overall the market power ultimately grows for these firms with minimum efficiency scales.

PLEASE UPVOTE INCASE YOU LIKED THE ANSWER WILL BE ENCOURAGING FOR US THANKYOU VERY MUCH ALL THE BEST IN FUTURE AS