Refer to Table 13-12. At what quantity does Firm 4 achieve its efficient scale, defined as the level of output at which average total cost is minimized?

• A. 100 units
• B. 400 units
• C. 250 units
• D. 600 units

Answer: (C)

Verified step by step guidance

1. Understand that the efficient scale of a firm is the quantity of output where the Average Total Cost (ATC) is minimized. This means we need to find the output level where ATC reaches its lowest point.
2. Recall the formula for Average Total Cost: \(\text{ATC} = \frac{\text{Total Cost (TC)}}{\text{Quantity (Q)}}\). You will need the total cost data for Firm 4 at different quantities to calculate ATC at each output level.
3. Calculate the ATC for Firm 4 at each quantity level provided in the table by dividing the total cost at that quantity by the quantity itself, i.e., \(\text{ATC}_Q = \frac{\text{TC}_Q}{Q}\).
4. Compare the ATC values calculated for each quantity to identify the minimum ATC. The quantity corresponding to this minimum ATC is the efficient scale of Firm 4.
5. Confirm that the quantity with the lowest ATC matches one of the options given (100, 250, 400, 600 units) to select the correct efficient scale.