Economies of scope exist if:
A)it is cheaper to have only one firm in an industry.
B)it is cheaper for one firm to produce two products jointly than for separate firms to produce them separately.
C)it is more expensive to have one firm in an industry.
D)it is cheaper for two firms to work together to make two products than for one firm to make both by itself.

Question

Quizplus · Accepted Answer

Economies of scope refer to cost savings that arise from producing two or more products or services jointly instead of separately. This can be achieved by a single firm producing the products or by multiple firms working together in a strategic alliance. Therefore, the correct option is B, which states that it is cheaper for one firm to produce two products jointly than for separate firms to produce them separately. Option A, on the other hand, refers to a monopoly and not economies of scope. Option C is incorrect as it states that it is more expensive to have one firm in an industry, which is not true in general. Option D is also incorrect since it ignores the possibility of joint production by the same firm.

Economies of Scope Exist If