posted by jean
You own a small bank in a state that is now considering allowing interstate banking. You oppose interstae banking because it will be possible for the very large money center banks in New York, Chicago, and San Francisco to open branches in your bank's geographic market area. While opponents of interstae banking point to the benefits to consumes of increased competition, you worry that economies of scale might ultimately force your now profitable bank of out business. Explain how economies of scale (if significant economies of scale in fact do exist) could result in your bank being forced out of business in the long run.
Take a shot. What do you think.
Hint: economies of scale means declining average costs as the size (output) of the company grows.