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The Equation Below Gives the Degree of Economies of Scope

Question 118

Multiple Choice

The equation below gives the degree of economies of scope (SC) :
SC = (C(Q1) + C(Q2) - C(Q1,Q2) ) / C(Q1,Q2)
Where C(Q1) is the cost of producing output Q1, C(Q2) is the cost of producing output Q2, and C(Q1,Q2) is the joint cost of producing both outputs. If SC is negative:


A) there are neither economies nor diseconomies of scope.
B) there are economies of scope.
C) there are diseconomies of scope.
D) there are both economies and diseconomies of scope.

Correct Answer:

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