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.
Key points
• The lowest production level at which a company can minimize long-run average costs.
• Achieving MES allows a company to operate efficiently and compete effectively.
• Firms below MES may face higher costs and reduced competitiveness.
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