Principles of Microeconomics / Unit 6 MIC 0539 short lesson, about 20 seconds
Minimum Efficient Scale and the Number of Firms
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The idea
Minimum efficient scale is the smallest output at which average cost is lowest. Market demand at that cost divided by it gives the number of efficient firms.
In practice
A million units and a scale of ten thousand hold about a hundred firms.
Where people slip
A scale as large as the market leaves room for one firm: units eight and ten's natural monopoly.
Your place on the trail
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