Wood Working Company (WWC)can produce tables for a cost equal to C = 30 + q_t or chairs for a cost equal to C = 30 + q_c.However,the firm can also produce tables and chairs simultaneously for a cost equal to C = 50 + q_c+ q_t.Does WWC experience economies of scope?

Question

Quizplus · Accepted Answer

Economies of scope occur when it is less expensive to produce two or more different products simultaneously than it is to produce them separately. To determine if WWC experiences economies of scope, we compare the cost of producing tables and chairs separately (C = C(table) + C(chair)) with the cost of producing tables and chairs simultaneously (C(table and chair)). C(table) = 30 + q_t C(chair) = 30 + q_c C(table and chair) = 50 + q_c + q_t We can see that the cost of producing tables and chairs separately is C(table) + C(chair) = 60 + q_t + q_c, which is greater than the cost of producing tables and chairs simultaneously, C(table and chair) = 50 + q_c + q_t. Therefore, WWC experiences economies of scope. The value of SC is 11ea6920_944d_11b7_80d0_2337d7957cf2_TB5322_11.

Wood Working Company (WWC)can Produce Tables for a Cost Equal