When there are economies of scope between products,selling off an unprofitable subsidiary could lead to:
A) a major reduction in costs.
B) only a minor reduction in costs.
C) only a minor reduction in sales.
D) a major reduction in sales.

Question

Quizplus · Accepted Answer

When there are economies of scope between products, selling off an unprofitable subsidiary could lead to a minor reduction in costs. This is because the subsidiary likely shares resources or production processes with other products in the company's portfolio, and selling it off could disrupt those economies of scope. However, if the subsidiary is truly unprofitable, selling it off could still result in a financial benefit to the company, even if the reduction in costs is only minor.

When There Are Economies of Scope Between Products,selling Off an Unprofitable