Constellation Brands Inc. is the world's biggest wine producer with 300-plus brands, from jug wines to coveted California reds, including the Clos du Bois, Geyser Peak and Woodbridge by Robert Mondavi labels. Based on this characteristic of firms, why would Constellation be more efficient than a market at coordinating economic activity?

Question

Quizplus · Accepted Answer

Constellation has economies of scope because it can produce multiple products (e.g., jug wines, California reds) using the same inputs (e.g., grapes, labor). This allows Constellation to spread its fixed costs over a larger number of products, reducing its average cost per product.