The efficient scale of production occurs where the marginal cost curve equals the marginal revenue curve

True or false

 

False

Step-by-step explanation

• Efficient scale of production occurs where long run average cost is equal to long run marginal cost
• At profit maximization point for a perfectly competitive firm, marginal cost is equal to the marginal revenue but efficient scale of production is a point where the firm does not enjoy economies of scale and at the same time the firm has not yet started to be affected by diseconomies of scale in the long run.
• Efficient scale of production level, the firm operate efficiently by trying to keep the cost of production per unit as low as possible because any increase in cost of one unit of production will result to an increase in marginal cost in the long run and an increase in marginal cost will make average cost to increase and an increase in average cost in the long run result to diseconomies of scale meaning, the firm is not operating efficiently. The firm is considered to operate efficiently at the point where LRAC is equal to LRMC.  During efficient scale production level, the firm receives constant returns to scale and this when the efficient scale of production occurs, that is, where in the long run marginal cost is equal to the long run average cost.