Originally Posted by Larry in TN

That's exactly right.

When you shrink an airplane, the number of seats drops faster than does cost. The shrunk A319neo/737-7 MAX can't compete on cost with the stretched A220-300 even though they have almost an identical seat count.

When you stretch an airplane the numbers of seats grows faster than costs. Look how popular the A320neo, A321neo, 737-800, 737-8 MAX, 737-900, 737-9 MAX and 737-10 MAX are. It is because of their per-unit (per seat) costs.

A shrunk larger design can't compete with a modern plane designed for the 100-130 seat market.

Which 747 did the best? The shrunk 747SP or the stretched 747-400?

Of course, as you stretch a design you run into other problems. Poor performance, higher approach and landing speeds, shorter range, etc. These problems, eventually, establish the limit to which you can stretch a design. As with most things in engineering, everything is a compromise.