Final answer:
GreyCo's plan to move to a more expensive location and raise prices may result in diseconomies of scale, where average costs increase. Without more information, it's hard to predict if this strategy will attract enough high-paying customers to justify the higher operation costs and prices, or if it will lead to reduced sales and profitability.
Step-by-step explanation:
The question concerns the potential consequences of GreyCo's decision to move its store to a more expensive location and raise prices to cover the higher costs. This scenario bears similarity to the concept of economies of scale, where the average costs of production decrease as a firm's output increases. However, if a company relocates to a costlier area and increases prices, the implication is that it might face the opposite effect, known as diseconomies of scale, where average costs increase due to a firm's expansion.
An example provided discusses a messenger company whose main cost is gasoline – should gasoline prices fall, the firm can deliver messages more economically, leading to increased profits and the ability to supply more services at any given price. This contrasts with GreyCo's plan, as increasing the cost of their operations by moving to an expensive location could lead to higher average costs and necessitate higher prices, which could potentially reduce their competitiveness unless the new location brings in substantially more revenue.
In effect, the best description of implementing such a plan could range from GreyCo potentially gaining a more lucrative clientele in the expensive location, thus justifying the higher costs and price increases, to struggling to retain customers after raising prices, leading to a decrease in sales volume and profitability. Therefore, without more details on customer demographics, market conditions, and the company's competitive positioning, it's difficult to predict the success or failure of the strategy accurately.