Investopedia

Continue to Site »

Minimum Efficient Scale

Filed Under » ,
Dictionary Says

Definition of 'Minimum Efficient Scale'

The smallest amount of production a company can achieve while still taking full advantage of economies of scale with regards to supplies and costs. In classical economics, the minimum efficient scale is defined as the lowest production point at which long-run total average costs (LRATC) are minimized.

The minimum efficient scale may be expressed as a range of production values, but its relationship to the total market size or demand will determine how many competitors can effectively operate in the market.


Investopedia Says

Investopedia explains 'Minimum Efficient Scale'

If the minimum efficient scale is relatively small compared to total market size (a good example would be computer software), many companies can exist in the same space. In other industries - such as telecom and basic materials - the minimum efficiency scale is quite large due to the high ratio of fixed costs to variable costs. In these types of industries, only a few major players tend to dominate the space.


Articles Of Interest

  1.

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.

  2. Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.

  3. Doing More With Less: The Sales-Per-Employee Ratio

    If used properly, this ratio can give you insight into a company's productivity and financial health.

  4. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  5. Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.

  6. Prisoner's Dilemma

    Learn more about this classic game theory scenario.

  7. Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.

  8. What Is "Chained CPI?"

    Chained CPI is one of many ways to approximate the impact of rising or falling prices to consumers' pocketbooks.

  9. Natural Disasters: Issues Relating To Leaves Of Absence

    Small businesses are more likely to fail in the aftermath of devastation. How can you as an employee handle issues after a disaster?

  10. What Is Elasticity?

    Elasticity measures the relationship between a good and its price based on consumer demand, consumer income, and its available supply. Learn the basics about it here.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Economy And Economics [1] => Economics )