Chapter 29, Problem 7CQ

Economies of Scale What does it mean to say that a proposed merger will take advantage of available economics of scale? Suppose Eastern Power Co. and Western Power Co. arc located in different time zones. Both operate at 60 percent of capacity except for peak periods, when they operate at 100 percent of capacity. The peak periods begin at 9:00 a.m. and 5:00 p.m. local time and last about 45 minutes. Explain why a merger between Eastern and Western might make sense.