When financial institutions are able to reduce the costs of information for each service they offer by applying the same information source to each service,we say that the financial institution is realizing

Question

Quizplus · Accepted Answer

Economies of scope refer to the cost savings achieved by a firm by producing two or more products using the same inputs or sharing common resources. In this case, by using the same information source for multiple services, the financial institution is able to reduce the costs of information for each service. This is an example of economies of scope, not economies of scale, which refer to the cost savings achieved by a firm by increasing the scale of production. Increasing returns and diminishing marginal returns refer to the relationship between inputs and outputs, and are not relevant to this scenario.

When Financial Institutions Are Able to Reduce the Costs of Information