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A company's minimum efficient scale is the productivity level where its internal economies of scale create output that's as efficient and inexpensive as possible. In simpler terms, it’s the sweet spot where a business maximizes its efficiency, balancing production volume with operational costs. At this point, the business entity attains productive efficiency and economies of scale
In other words, it is the optimum output level at which the company can realize the lowest cost of production of goods or services. Minimum efficient scale refers to the lowest level of production at which a firm can produce its goods or services at the lowest average cost In industrial organization, the minimum efficient scale (mes) or efficient scale of production is the lowest point where the plant (or firm) can produce such that its long run average costs are minimized with production remaining effective
Efficient scale is defined as the optimal size of a business or organization that maximizes its efficiency and profitability
That means it is the size at which the average cost of producing a good or service is minimized. The minimum efficient scale in economics relates to the smallest amount of output that a firm can produce while still optimizing its economies of scale. When a business expands its production, it initially benefits from economies of scale, meaning the average cost of producing each unit decreases as the total volume of output increases One common source of cost reduction is bulk purchasing, where larger orders allow the firm to negotiate lower prices per unit from suppliers.
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