THE MINIMUM EFFICIENT SCALE: A NOTE ON TERMINOLOGY

The minimum efficient scaJe is defined in two alternative ways in microeconomics textbooks: 1) The JeveJ of output that minimizes the Jang-mn average cost is called the minimum efficient scaJe (Varian, 1990:410). According to this definition, the output JeveJ which corresponds to the minimum point of a U-shaped Jang-mn average cost curve as well as any output JeveJ which corresponds to the horizontaJ part of a L-shaped or saucer-shaped Jong-mn average cost curve can be called the minimum efficient scale. 2) The output JeveJ at which the Jong-mn average cost curve first becomes horizontal is called the minimum efficient scale (Begg, Fischer, Dornbusch 1991:118). According to this definition, the minimum efficient .scale is a concept reJevant for onJy L-shaped or saucer-shapcd Jang-mn average cost curves 1. Yet, in textbooks providing this definition the minimum efficient scaJe is diagrammatically iIIustrated using strictly U-shaped Jongmn average cost curves2.