[Related to the Economics in Practice on p. 198] A new innovation in computer technology is called “cloud computing.”

With cloud computing, information and software are provided to computers on an “as-needed” basis, much like utilities are provided to homes and businesses. In a statement advocating the advantages of large, public cloud providers like Amazon.com over smaller enterprise data centers, James Hamilton, a vice president at Amazon claimed that “server,

networking and administration costs the average enterprise five to seven times what it costs a large provider.” What does Hamilton’s statement imply about the returns to scale in the cloud computing industry?
Source: James Urquhart, “James Hamilton on cloud economies of scale,”
cnet.com, April 28, 2010.