A firm produces leather handbags and leather shoes. If there are economies of scope, the product transformation curve between handbags and shoes will be:

Question

Quizplus · Accepted Answer

If there are economies of scope, it means that producing both handbags and shoes together is more cost-efficient than producing only one of the products. Therefore, the product transformation curve must be bowed outward (concave), which shows that the firm can produce more of both products together than it could if it specialized in producing only one of them.

A Firm Produces Leather Handbags and Leather Shoes