minimum efficient scale

The minimum efficient scale (MES) is the smallest level of production a company must reach to operate as efficiently as possible, minimizing costs per unit. When a business produces at or above this level, it benefits from economies of scale—cost savings gained through increased output—making its products more competitive. Producing below MES often results in higher costs per item, which can make it harder to succeed financially. In essence, MES is the point where a company’s size allows it to produce goods at the lowest possible average cost.