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Minimum efficient scale mes

Minimum Efficient Scale (MES)

Minimum Efficient Scale (MES) refers to the lowest level of production at which a company can achieve the economies of scale necessary to minimize its long-run average costs. At this point, the company is operating efficiently and can compete effectively with others in the market. Firms that do not reach MES may face higher per-unit costs and be less competitive.

Example

A car manufacturer determines that it must produce 10,000 vehicles per year to achieve its Minimum Efficient Scale and reduce per-unit production costs.

Key points

• The lowest production level at which a company can minimize long-run average costs.

• Achieving MES allows a company to operate efficiently and compete effectively.

• Firms below MES may face higher costs and reduced competitiveness.

Quick Answers to Curious Questions

What is Minimum Efficient Scale (MES)?

MES is the lowest production level at which a company can minimize long-run average costs and operate efficiently.

Why is achieving MES important for companies?

It allows companies to reduce per-unit costs and remain competitive in the market.

What happens to firms that do not reach MES?

Firms that do not reach MES may face higher costs and struggle to compete with more efficient competitors.

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