Minimum Efficient Scale

It is the term mostly used for the production unit’s ability to deliver the smallest output level at which long-run average cost is at its minimum. 

It can be used in a manner to reduce average costs where the businesses can achieve full benefits of economies of scale with the proper management of material and expenses, where internal abilities are fully exploited by using better technology, different types of investment products, innovation and specialization in commodities production to make use of new resources to lower the overall costs. 

Traditionally, the level is defined as the lowest stage at which the long-term average market value of goods manufactured can be minimized. 

The scale provides insight into the competitiveness of an industry and the industry with high MES has few large firms.

If the MES is comparatively diminutive as compared to the market, it can survive in the same space and sometimes, such expenses are higher due to elevated fixed costs where only a few players dominate the sector and have access to the basic material.