In order for corporate diversification to be economically valuable
A) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
B) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
C) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
D) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

Question

Quizplus · Accepted Answer

For corporate diversification to be economically valuable, there must be some valuable economy of scope among the multiple businesses in which a firm is operating. This means that the firm can benefit from sharing resources and capabilities across different businesses. However, in order for the diversification to create value, it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

In Order for Corporate Diversification to Be Economically Valuable