"The thing a lot of people don't understand about e-commerce is the degree to which it is a scale business. While a conventional retailer might have to double its capital spending to double sales, Amazon's costs are largely fixed. Once our software is written, we can handle a lot of customers with it." (Jeff Bezos, CEO of Amazon.com)
Explain what this comment means in terms of production and costs. (Write two or three paragraphs.) To illustrate your answer, draw hypothetical short-run and long-run cost curves for a conventional retailer compared with an e-commerce retailer and discuss the differences.