Question

According to the rank-size rule, which of the following is typically true of higher-order services, such as hospitals with a large number of medical specialties?
They are located in suburbs.

They are located in small towns.

They have smaller ranges and thresholds.

They have larger ranges and thresholds.

Answer 1

Answer: They have larger ranges and thresholds.

Explanation: The rank-size rule defines range as the longest distance that a customer will travel to purchase a good or service. Threshold is the minimum market needed to support the supply of a product or service. It is assumed that customers which travel longer distances to purchase a higher-order good or service, and a provider of such goods and services will require a larger customer base to make a profit. Thus, higher-order services have larger ranges and thresholds.