Figure 7.5.1
-Refer to Figure 7.5.1 above. The combination of outputs in the figure describes a situation in which:
A) a company specializing in cars and another in tractors would generate the same output as a single company producing both.
B) joint production has advantages that enable a single company to produce more cars and tractors with the same resources than would two companies producing each product separately.
C) a direct relationship between economies of scale and economies of scope.
D) a two-output firm can enjoy economies of scope only if its production process does not involve diseconomies of scale.

Question

Figure 7.5.1
-Refer to Figure 7.5.1 above. The combination of outputs in the figure describes a situation in which:
A) a company specializing in cars and another in tractors would generate the same output as a single company producing both. 
B) joint production has advantages that enable a single company to produce more cars and tractors with the same resources than would two companies producing each product separately. 
C) a direct relationship between economies of scale and economies of scope. 
D) a two-output firm can enjoy economies of scope only if its production process does not involve diseconomies of scale.

Quizplus · Accepted Answer

The combination of outputs in the figure shows that producing cars and tractors jointly has advantages, as the joint production curve is further to the right than the separate production curves for cars and tractors. This indicates that a single company producing both products can produce more with the same resources than two separate companies producing each product individually. This is an example of economies of scope, where producing two related products together leads to cost savings compared to producing each product separately.

Figure 7.5.1 -Refer to Figure 7.5.1 Above. the Combination of Outputs in Outputs