Question

You own a small bank in a state that is now considering allowing interstate banking. You oppose interstarte banking because it will be possible for the very large money center banks in New York, Chicago, and San Francisco to open branches in your bank's geographic market area. While proponents of interstate banking point to the benefits to cosumers of increased competition, you worry that economics of scale might ultimately force your now profitable bank out of business.

Explain how economics of scale (if significicant economics of scale in fact to exist) could result in your bank being forced out of business in the long run.