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

Question

Quizplus · Accepted Answer

Whether Coles or 7-Eleven have economies of scale depends on the number of customers served. If both stores serve a similar number of customers, then Coles may have economies of scale due to its larger size and ability to purchase goods in bulk. However, if the 7-Eleven store serves more customers, it may have lower costs per unit of output and therefore experience economies of scale. Additionally, while it is true that smaller stores like 7-Eleven may have lower startup costs, this does not necessarily mean that their long-term average costs will always be lower than a larger store like Coles.

Consider a Coles Hypermaket and a 7-Eleven Store