Minimum Efficient Scale (MES)

Minimum Efficient Scale (MES) refers to the lowest level of production at which a company can achieve the economies of scale necessary to minimize its long-run average costs. At this point, the company is operating efficiently and can compete effectively with others in the market. Firms that do not reach MES may face higher per-unit costs and be less competitive.

Example

A car manufacturer determines that it must produce 10,000 vehicles per year to achieve its Minimum Efficient Scale and reduce per-unit production costs.