Question

Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?

Short answer

If there are more taxis with reliable drivers, the taxicab sector in large cities can benefit from economies of scale.

Step-by-step solution

Step 1. Introduction

Economies of scale: When a corporation expands its operations owing to size, output, or other factors, it gains a cost advantage.

Step 2. Explanation

Normally, private firms run the taxicab industry. Large cities require more cabs to cover more ground, hence there should be more of them. Taxis should be well-maintained and driven by drivers who are familiar with the area and language. Commuters should also enjoy a hassle-free, safe, and less expensive ride. In the long run, this will enable them earn profits and benefit from economies of scale.