How big is The Matrix?
It is easy to think of it as simulating the whole world. But much suggests it is more local than that.
It is 'the' city and 'the' mountains. I think it is also 'the' freeway in a literal sense. Everyone always seems to hack into the same place no matter where they go in their ships.
If Xion has a quarter of a million citizens and this is meant to be a 1% who do not accept the Matrix PLUS the natural born humans then the Matrix cannot have more than 25 million people in it. A big city alone can have millions; we know 'the' mountains are some 500 miles from the city- easily enough room to fit everyone.
So I think the Matrix covers a relatively small area, do you agree?