7. Economies of scale [LO 26.3] What does it mean to say that a proposed merger will take advantage of available economies of scale?

Suppose Eastern Power Co. and Western Power Co. are located in different time zones. Both of them operate at 60 per cent of capacity except for peak periods, when they operate at 100 per cent 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.