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    Economies of Scale

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    How would you explain the situation below?

    You are the owner of a small bank in a state that is considering allowing interstate banking. You do not like this because it will be possible for the large money center banks in Washington, Las Vegas to open branches in your banks geographic market area. While the states' reasoning believes that the benefits to consumers of increased competition, you believe that economies of scale could force you out of business. Explain how economies of scale (if large economies of scale in fact do exist) could force you out of business in the long run?

    Thank you

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    Solution Preview

    Hi there,

    First, here is some info regarding what Economies of Scale mean:

    Economy of scale applies where attaining a certain size gives greater economic benefits to part of an operation perhaps for a particular task. Similar to the concept of critical mass, economy of scale implies that some companies are simply too small to enter or remain in some markets. For example ...

    Solution Summary

    Economies of scales are examined.