In entering the European market, Rinker Audio Products is aware that each country in Europe is different and that the company has to be responsive to local needs. The company's CFO, Neha Patel, believes that the company has to address its minimum efficient scale of output to be successful in Europe. Which of the following statements is true about minimum efficient scale of output?
A. With lesser utilization of capital equipment, the chances of a firm realizing economies of scale increases.
B. A plant must avoid operating at the minimum efficient scale of output to realize all major plant-level scale economies.
C. When the minimum efficient scale of production is very low relative to global demand, it will be economical to manufacture a product at a single location.
D. An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness.
E. A low minimum efficient scale increases the risk of potentially adverse fluctuations in exchange rates.
Answer: D. An advantage of a low minimum efficient scale is that it allows the firm to accomodate demands for local responsiveness