Final answer:
Economies of scale are achieved when increasing the production scale leads to a decrease in the average cost per unit, as fixed costs are spread over more units. This concept applies to various industries, such as cloud services, where serving additional customers adds minimal cost once infrastructure is established, allowing businesses like warehouse stores to provide goods at lower expenses due to their large-scale operations.
Step-by-step explanation:
Economies of scale result from the ability to spread fixed costs over a larger number of units, leading to a reduction in the average cost per unit. The best option among the given answers is having hundreds of thousands of customers aggregated in the cloud, which showcases the principle of economies of scale by indicating how large-scale operations can lead to lower costs per customer. This concept is particularly true for industries like utilities or cloud service providers, where once the infrastructure is in place, the cost of serving additional customers is relatively low. Therefore, industries with substantial economies of scale can often operate more efficiently and cost-effectively at a larger scale than at a smaller one, just like warehouse stores such as Costco or Walmart can provide goods at lower costs due to their large-scale operations.
Cities can also be viewed as examples of economies of scale because they provide a concentrated population that allows businesses to produce at an efficient scale. Moreover, this concentration of economic activity makes it easier for businesses to hire and for consumers to enjoy a wide variety of products and services, as they all benefit from the collective efficiency brought about by economies of scale.