Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If the measure of economies of scope,SC,is zero,then which of the following must be TRUE?
A) a = b
B) a + b = -c
C) c = 0
D) a = -b

Question

Quizplus · Accepted Answer

The measure of economies of scope is given by SC = C(x,y) - C(x,0) - C(0,y), which means the savings achieved by producing both goods together instead of separately. If SC is zero, it means that there are no economies of scope, and the cost of producing both goods together is the same as producing them separately. Therefore, there is no interaction between x and y, and cxy must be zero. Thus, c = 0.

Suppose the Cost of Producing Two Goods,x and Y,can Be