Consider a Wal-Mart supercenter and a 7-Eleven store.In the long run,
A) Wal-Mart or 7-Eleven may have economies of scale depending on how many customers are served.
B) Wal-Mart will definitely have lower average costs because supercenters serve many more customers.
C) The 7-Eleven store will definitely have lower average costs because their small stores are cheaper to build.
D) Wal-Mart's average total cost will decline faster than the 7-Eleven store and experience diseconomies of scale.
E) The 7-Eleven store's average total cost will be lower than Wal-Mart's and always experience economies of scale.

Question

Quizplus · Accepted Answer

The economies of scale for both Wal-Mart and 7-Eleven will depend on how many customers they are serving. A larger number of customers will lead to lower average costs due to spreading fixed costs over a larger output. Therefore, without knowing the number of customers served, it is not possible to determine which company will have economies of scale.

Consider a Wal-Mart Supercenter and a 7-Eleven Store