Producing 200 units of good Y and 100 units of good X in the same factory costs the firm $50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in another factory costs the firm $75,000. So, if the firm produces the two goods together, it achieves:
A) quadratic returns to scale.
B) diseconomies of scope.
C) economies of scope.
D) diseconomies of scale and diseconomies of scope.

Question

Quizplus · Accepted Answer

Economies of scope occur when producing two different goods together is cheaper than producing them separately. In this case, producing both goods in the same factory costs $50,000, whereas producing them in separate factories costs $75,000, indicating that the firm achieves economies of scope by producing the two goods together.

Producing 200 Units of Good Y and 100 Units of Good