Minimum Efficient Scale

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Minimum efficient scale (MES) is a term used in industrial organization to denote the smallest output that a plant (or firm) can produce such that its long run average costs are minimized. This concept is useful in determining the likely market structure of a market. For instance, if the minimum efficient scale is small relative to the overall size of the market (demand for the good), there will be a large number of firms. The firms in this market will be likely to behave in a perfectly competitive manor due to the large number of competitors. [1]

[edit] References

  1. ^ Carlton D. and Perloff M.: "Modern Industrial Organization" Fourth Edition, 2005
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