Minimum Efficient Scale (MES): Gorecki (1975), Kessides (1986) and Saikia (1997) explored the role of MES in determining entry but did not find it to be a significant deterrent.
Industries with a larger
minimum efficient scale should have higher price-cost margins and, thus, a higher probability of firm survival.
Entrepreneurs, executives and stockholders face similar uncertainty as disruptive technologies change the rules of the game by reducing entry barriers and lowering the
minimum efficient scale (the smallest amount a company must produce while still taking full advantage of economies of scale).
That would take output at the plant to around 200,000 units a year - something close to what's seen by many analysts as the '
Minimum Efficient Scale' needed for a car assembly plant to get its costs right down.
Despite sagging customer demand, the company still intends to retain the business unit at a
minimum efficient scale, emphasizing that it won't make its second cut on the remaining workforce, but will keep vying for contract orders for tablet PCs in the future, though such products contribute only a few to its overall sales revenue for the moment.
For all platform businesses the
minimum efficient scale is very large.
COLEP lowers the
minimum efficient scale [MES] by integrating the different stages of the value chain, although it is evident that the upstream activities have higher
minimum efficient scales than the downstream activities.
When there are important economies of size in processing, some regions simply may not be able to supply the volume of product required to justify construction of processing facilities that operate at the
minimum efficient scale. Smaller, less efficient processing plants may be available, but these raise product costs.
Minimum efficient scale ([[epsilon].sub.CY] not statistically different than zero at [alpha] = 0.05) was computed for each cost.
One of the implications of this "tariff-limit pricing behavior," in which firms set prices at the international market price plus the domestic tariff regardless of their marginal costs, is that, in equilibrium, it may be optimal for firms to produce to the left of their point of
minimum efficient scale (MES).
For this reason, ventures with a high
minimum efficient scale are not good grazing grounds for the nonprofit, for they will not be able to scale up sufficiently quickly to make the venture work.
Specifically, the minimum average cost, whether this occurs at a single
minimum efficient scale or along some constant portion of the long-run average cost function, is found econometrically for a sample of firms.
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