Minimum efficient scale
Minimum efficient scale (MES) is the output level at which long-run average cost is minimised. It represents the smallest firm size at which a firm can achieve maximum cost efficiency in its industry.
Real World
Building a car factory like Nissan's Sunderland plant requires billions in investment before unit costs fall, giving MES of around 200,000 cars per year — explaining why only a handful of manufacturers dominate the global market.
Exam Focus
Link MES to market structure: high MES means natural oligopoly or monopoly; low MES supports competitive markets.
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