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The Minimum Efficient Scale is actually a complex way of stating a simple
Idea: The bottom part of the RAC, the minimum point of RAC. What is the
significant thing about that bottom point? Well, you realize at this
point that economies of scale runs out and diseconomy of scale kicks in
at that point. So, ideally as an owner of a firm, you just try to expand
all the way to this point because before this point as to benefits to
begin after this point, diseconomies of scale kicks in and there is no
further benefit. So, this point is ideal but how big is the MES. Again,
that varies of every firm on the market. In fact, that is actually the
interesting part. For example, the MES for a food court stall may be only
10 square meters but MES for a petrochemical firm might be on the scales
of billions and billions of dollars. So, then in this case you realize
that what you learn in the next topic is there are some firms that are
able to reap economies of scale and they have been the only firm in the
market because they have to be so big. So, this is called Natural Monopoly.
So, just keep this idea at the back of your head when we move on.