Although firms may produce at levels other than MES, we nevertheless assume they
are producing efficiently and achieve minimum production cost per unit at that
level of output. That is, they are producing at a point on the relevant average total
cost curve. It is possible, however, that the firm might not be fully efficient and
therefore be incurring additional costs. In short, costs might be higher at a specific
level of output than they need be. Such a situation is illustrated in Figure 5.14.