If a new firm entering the industry desires to produce at the minimum efficient scale, would it wish to produce 10 units per period, 500 units or 1000 units per period?
Concept Introduction:
Diseconomies of scale: The diseconomies of scale are a situation in which long run average cost rises due to the increase in output. The diseconomies of scale leads to limiting the expansion of output, some of the diseconomies are due to co-ordination failure, low motivation for workers in the firms, principal agent problem etc...
Economies of scale: Economies of scale is a situation in which increasing of plant size leads to lower average cost curve. The best example of economies of scale is specialization and division of labour. This enables the workers to do efficient tasks with a little training so this leads to a lower
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