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In which of the following situations would consideration of the minimum efficient scale of operation suggest that the market should be served by a large number of small firms to minimize production costs?
1. When the LRAC curve slopes downward over the relevant range of output
2. When the LRAC curve initially increases and then decreases beyond some point
3. When the LRAC curve is U-shaped and the demand for output is relatively small
4. When the LRAC curve hits its minimum point at a relatively low level of output and then increases and the demand for output is quite large
1. The annual demand for a product is 8,000 units. The order cost is $30 for a single order. The cost of the item is $10 and the holding cost has been calculated at $3 to carry one
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