An electricity-generating company confronts the following long-run average total costs associated with alternative plant sizes. It is currently operating at plant size $G$.

a. What is this firm's minimum efficient scale?

b. If damage caused by a powerful hurricane generates a reduction in the firm's plant size from its current size to $B$, would there be a leftward or rightward movement along the firm's long-run average total cost curve?

The balance point at which a company can produce goods at a competitive price is known as the minimum efficient scale (MES). Obtaining MES reduces the long-run average total cost (LRATC). The MES is the point on a company's long-run average cost curve where economies of scale are exhausted and constant returns begin.

The tables gives the average total cost of company is as:

According to the above table, the average long-run total cost is at the lowest level at plant size '$E$'. As a result, the minimum efficient scale of the firm is at plant size "$E$ ".

Given a reduction in operating plant size, there would be a leftward shift along the long-run average cost curve. Because of the powerful hurricane, the firm's plant size would be reduced.