Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If there are economies of scope,then which of the following must be TRUE? A) c 0 B) a + b = -c C) c = 0 D) c

Question

Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If there are economies of scope,then which of the following must be TRUE?
A) c > 0
B) a + b = -c
C) c = 0
D) c < 0

Quizplus · Accepted Answer

Economies of scope occur when the cost of producing goods together is less than producing them separately. In the given equation, C = ax + by + cxy, a negative value of c (c < 0) implies that the interaction term (cxy) reduces the total cost, indicating economies of scope.

Suppose the Cost of Producing Two Goods,x and Y,can Be