Question

Consider Figure 22-6. Suppose that the current scale of output for a typical firm facing this LAC curve, which applies to all firms in this industry, is between points A and B, at about 500 units per period. 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 per period, or 1,000 units per period? Explain.

Short answer

It would produce$10$units per period

Step-by-step solution

Introduction

Assume that the ongoing size of results for a run of the mill firm confronting this LAC is at around 500 for every unit of the period. If another firm enters the business, the base effective point for the firm to create would be at10units per period.

Explanation

Given the LAC assuming another firm goes into the business it would deliver at the base proficient point. At which the base productive point the typical expense will be low. At the point when the firm attempts to extend its result the typical expense will be low and thereby the organizations partake in the advantages of economies of scale. Economies of scale are what is happening in which expanding of plant size prompts below cost bend. The diseconomies of scale are what is going on in which long-run normal expense ascends because of the expansion in yield. hence It would produce $10$units per period.