Draw a standard long-run average cost curve. Identify on the graph and define economies of scale (or increasing returns to scale), constant returns to scale, and diseconomies of scale (or decreasing returns to scale). Also identify and define the minimum efficient scale (MES). How does the relationship between MES and the market demand affect the structure of an industry? Specifically, how does this relationship affect the equilibrium number of competitors in a market?

Draw a standard long-run average cost curve. Identify on the graph and define economies of scale (or increasing returns to scale), constant returns to scale, and diseconomies of scale (or decreasing returns to scale). Also identify and define the minimum efficient scale (MES). How does the relationship between MES and the market demand affect the structure of an industry? Specifically, how does this relationship affect the equilibrium number of competitors in a market?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.4P

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