Question 1

​Farmers rotate their crops between corn and soybean to increase crop yields.This behavior exhibits
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

Farmers rotating their crops between corn and soybean are exhibiting economies of scope. This is because planting different crops in the same field can increase the overall yield per acre of land by reducing soil erosion, controlling pests and diseases, and improving soil fertility. This is different from economies of scale, which refers to the cost advantages of increasing the scale of production, or economies of scope, which refer to the cost advantages of producing multiple products together. Similarly, neither diseconomies of scale nor diseconomies of scope would accurately describe this behavior.

Question 2

​What are economies of scope?
A)​lower average costs when multiple different products are produced
B)higher average costs when multiple different products are produced
C)Constant average costs when multiple different products are produced
D)​none of the above

Accepted Answer

Economies of scope refer to the cost advantages that a firm can enjoy by producing multiple products at once. This allows the firm to spread its fixed costs over a larger output and reduces the average cost of production. As a result, the firm can produce a variety of products more efficiently and at a lower cost than if it were producing each product separately. Therefore, choice A is the correct answer.

Question 3

​Eddys' Electronics found that instead of producing a dvd player and a gaming system separately,it is cheaper to incorporate dvd playing capabilities in their new version of the gaming system.Eddy's is taking advantage of
A)​Economies of Scale
B)Learning curve
C)Economies of Scope
D)​Decreasing marginal costs

Accepted Answer

Eddy's Electronics is taking advantage of economies of scope, which refers to the cost savings that occur when a company produces multiple products using the same resources and capabilities. By incorporating dvd playing capabilities in their gaming system, Eddy's is able to reduce production costs and increase efficiency. Economies of scale (A) refer to cost savings that occur when a company produces more of a single product, learning curve (B) refers to the improvement in efficiency that occurs as workers gain experience with a task, and decreasing marginal costs (D) refer to the reduction in average cost that occurs as output increases.

Question 4

​A firewood supplier has a very seasonal demand for its product.Its transport trucks lay idle during the warmer parts of the year.It can exploit economies of scope if
A)​It merges with a manufacturer of wooden Christmas ornaments
B)It turns into a rental trucking company during the warmer months for other seasonal producers such as ice-cream makers
C)It starts producing other seasonal products that would sell mostly during the warmer months such as rustic lawn chairs
D)​B and C

Accepted Answer

By diversifying into rental trucking services for other seasonal producers during the warmer months and producing other seasonal products, the firewood supplier can exploit economies of scope. This will allow them to utilize their idle transport trucks while generating additional revenue and expanding their customer base. Therefore, options B and C together would be the best choice.

Question 5

​What are diseconomies of scope?
A)​the cost of producing two products jointly by one firm is more than the cost of producing them separately
B)the cost of producing two products jointly by one firm is lesser than the cost of producing them separately
C)the cost of producing two products jointly by one firm is equal to the cost of producing them separately
D)​none of the above

Accepted Answer

Diseconomies of Scope are the opposite of Economies of Scope, which happens when a firm produces multiple products with a higher cost than the cost of producing these products separately. This could be due to various reasons, such as increased coordination costs, lack of specialization or differences in production requirements. Therefore, option A is the correct answer.

Question 6

​It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1500.The firm has experienced
A)​Economies of Scale
B)Economies of Scope
C)Diseconomies of Scale 
D)​Diseconomies of Scope

Accepted Answer

The answer of ​It costs firm A $800 to produce...

Question 7

​The ability to lower the average costs over total production as more products are introduced
A)​Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)​Diseconomies of Scope

Accepted Answer

Economies of Scope refer to the cost advantages that a business obtains due to a broader scope of operations. In this context, it means lowering the average cost per unit through the production of more types of products, rather than just increasing the quantity of a single product.

Question 8

Wine Distribution Merger
Two of UK's larger wine distribution companies,Bibendum and PLB,merged their businesses in October 2014.Bibendum is primarily a restaurant supplier while PLB focuses on supplying wines to retailers.Does this suggest a mechanism through which the merger might create value?​

Accepted Answer

The answer of Wine Distribution Merger
Two of UK's larger wine...

Question 9

Learning curves mean​
A)​you learn from experience
B)current production decreases future unit costs
C)production today leads to lower costs in the future
D)​All of the above

Accepted Answer

Learning curves exhibit that as production increases, costs decrease due to experience, improvement in the production process, and economies of scale. This leads to lower unit costs and a significant decrease in the cost of production over time. Therefore, all of the above choices are correct.

Question 10

​A food company trying to increase its profits by expanding in to the soft drinks business is an example of
A)​Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)​Diseconomies of Scope

Accepted Answer

Economies of scope refer to the cost savings that result from producing multiple products or services together, often using the same resources. In this case, the food company can use its existing resources, such as production facilities and distribution channels, to also produce and sell soft drinks. This can lead to cost savings and increased profitability for the company.

Question 11

The ability to lower the average costs of production as the quantity produced increases is called​
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

Economies of scale refer to the cost advantages that a firm can achieve by increasing the scale of production. As the quantity produced increases, firms can take advantage of bulk discounts on raw materials, lower per-unit labor costs, and more efficient use of capital equipment, which all help to lower the average cost of producing each unit. Economies of scope, on the other hand, refer to the cost savings that a firm can achieve by producing a range of related products together. Diseconomies of scale occur when the average cost of producing each unit increases as the firm continues to grow, while diseconomies of scope occur when the cost savings from producing related products together are smaller than the costs of running the business as a whole.

Question 12

​Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.At this point,Ray's Radios should
A)​Increase production of the batteries
B)Divest itself from the production of the batteries
C)Shut down the production of the batteries
D)​None of the above

Accepted Answer

The answer of ​Ray's Radios believed the synergies between radio...

Question 13

​A food truck operator originally produced hamburgers and hotdogs.To serve the tastes of their various customers,the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well.Since the new products were introduced,average costs rose dramatically.The vendor is experiencing
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

Diseconomies of scope occur when producing additional types of products or services leads to an increase in the average cost of production. In this case, the introduction of turkey dogs and ham sandwiches resulted in a dramatic increase in average costs, indicating diseconomies of scope.

Question 14

​What are economies of scope?
A)​the cost of producing two products jointly by one firm is more than the cost of producing them separately
B)the cost of producing two products jointly by one firm is lesser than the cost of producing them separately
C)the cost of producing two products jointly by one firm is equal to the cost of producing them separately
D)​none of the above

Accepted Answer

Economies of scope refer to the cost advantages a firm experiences when it produces multiple products or services. Specifically, the cost of producing two products jointly by one firm is lower than the cost of producing them separately, which is why option B is correct. This allows the firm to spread out fixed costs over a larger variety of products and achieve economies of scale. Thus, a firm that produces several products benefits from economies of scope.

Question 15

​After sugar refiner has produced fine sugar for baking purposes,what is left over is used to produce molasses.This technology exhibits
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

The technology of using the leftover sugar to produce molasses exhibits economies of scope, as it allows the sugar refiner to generate additional revenue without incurring significant additional costs or needing specialized resources. The production of molasses complements the primary activity of sugar refining, without requiring a separate production process or facility.

Question 16

​An airlines realizes that instead of offering free checked in baggage,they could put a charge on checked baggage without the demand for the tickets decreasing.The space saved can be used to carry priority mail packages,with hardly any additional costs.The airlines has realized
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

The airline is using economies of scope by using the saved space from checked baggage to carry priority mail packages without incurring additional costs. This allows the airline to offer an additional service without increasing their costs, thus taking advantage of the scope of their operations.

Question 17

​What is a synergy or cost complementarity?
A)​the cost of producing different products offered by separate companies would be more expensive when produced by one company
B)the cost of producing different products offered by separate companies is higher than when produced by one company
C)the cost of producing different products offered by separate companies is equal to when the products are produced by one company
D)​None of the above

Accepted Answer

Synergy or cost complementarity occurs when the combined operation of producing different products by one company is less expensive than when those products are produced by separate companies. This can result from shared resources, economies of scale, or other efficiencies.

Question 18

​Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.Ray's Radios is experiencing
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Accepted Answer

Diseconomies of scope occur when a company expands its operations or product line in a way that leads to inefficiencies or increased costs, as seen in Ray's Radios where expanding into battery production caused the radio unit costs to increase due to less attention being devoted to the radio business.

Question 19

​It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1000.The firm has experienced
A)​Economies of Scale
B)Economies of Scope
C)Diseconomies of Scale
D)​Diseconomies of Scope

Accepted Answer

The merger of firm A and firm B leads to economies of scope since the two firms can now produce two different products (radios and batteries) at a lower cost than producing them separately.

Question 20

​Which of these statements are FALSE
A)​If production exhibits diseconomies of scope,firm should reduce the number of products to reduce costs.
B)If production exhibits diseconomies of scope,firm should increase the number of products to reduce costs.
C)If production exhibits economies of scope,firm should increase the number of products to reduce costs.
D)​If production exhibits economies of scope,firm should increase the number of products to reduce costs.

Accepted Answer

If production exhibits diseconomies of scope, it means producing multiple products is more costly than producing them separately. Therefore, increasing the number of products will only further increase costs. Choosing A or D would make sense if production exhibited economies of scope, where producing multiple products together leads to cost savings. C is also true in this case, as increasing the number of products can lead to more efficient production.

Quiz 6: Economies of Scale and Scope

​Farmers rotate their crops between corn and soybean to increase crop yields.This behavior exhibits

​What are economies of scope?

​Eddys' Electronics found that instead of producing a dvd player and a gaming system separately,it is cheaper to incorporate dvd playing capabilities in their new version of the gaming system.Eddy's is taking advantage of

​A firewood supplier has a very seasonal demand for its product.Its transport trucks lay idle during the warmer parts of the year.It can exploit economies of scope if

​What are diseconomies of scope?

​It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1500.The firm has experienced

​The ability to lower the average costs over total production as more products are introduced

Learning curves mean​

​A food company trying to increase its profits by expanding in to the soft drinks business is an example of

The ability to lower the average costs of production as the quantity produced increases is called​

​Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.At this point,Ray's Radios should

​A food truck operator originally produced hamburgers and hotdogs.To serve the tastes of their various customers,the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well.Since the new products were introduced,average costs rose dramatically.The vendor is experiencing

​What are economies of scope?

​After sugar refiner has produced fine sugar for baking purposes,what is left over is used to produce molasses.This technology exhibits

​An airlines realizes that instead of offering free checked in baggage,they could put a charge on checked baggage without the demand for the tickets decreasing.The space saved can be used to carry priority mail packages,with hardly any additional costs.The airlines has realized

​What is a synergy or cost complementarity?

​Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.Ray's Radios is experiencing

​It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1000.The firm has experienced

​Which of these statements are FALSE

Farmers rotate their crops between corn and soybean to increase crop yields.This behavior exhibits

What are economies of scope?

Eddys' Electronics found that instead of producing a dvd player and a gaming system separately,it is cheaper to incorporate dvd playing capabilities in their new version of the gaming system.Eddy's is taking advantage of

A firewood supplier has a very seasonal demand for its product.Its transport trucks lay idle during the warmer parts of the year.It can exploit economies of scope if

What are diseconomies of scope?

It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1500.The firm has experienced

The ability to lower the average costs over total production as more products are introduced

Learning curves mean

A food company trying to increase its profits by expanding in to the soft drinks business is an example of

The ability to lower the average costs of production as the quantity produced increases is called

Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.At this point,Ray's Radios should

A food truck operator originally produced hamburgers and hotdogs.To serve the tastes of their various customers,the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well.Since the new products were introduced,average costs rose dramatically.The vendor is experiencing

What are economies of scope?

After sugar refiner has produced fine sugar for baking purposes,what is left over is used to produce molasses.This technology exhibits

An airlines realizes that instead of offering free checked in baggage,they could put a charge on checked baggage without the demand for the tickets decreasing.The space saved can be used to carry priority mail packages,with hardly any additional costs.The airlines has realized

What is a synergy or cost complementarity?

Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded.However,due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing.Ray's Radios is experiencing

It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries.If Firm A merges with firm B,it can produce both the five radios and the five batteries for $1000.The firm has experienced

Which of these statements are FALSE