Minimum efficient scale
Definition. The minimum efficient scale is the lowest level of output at which a firm fully exhausts its economies of scale and so reaches the lowest point of its long run average cost curve. At this scale the firm produces at the minimum achievable cost per unit.
Where the minimum efficient scale is large relative to total market demand, only a few firms can operate efficiently, which helps explain concentrated market structures such as oligopoly and natural monopoly.
This term belongs to Costs and Economies of Scale in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use minimum efficient scale for marks in the exam? Learn it in class or message the team.