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Cost | Economics of Scope | Microeconomics

Cost: Economies of Scope

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July 16, 2014
Marjankhan
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Economies of scale, economies of scope and the full cost-curve family are covered with worked examples in the Economics Made Simple Complete Bundle — textbook, practice questions with mark schemes, flashcards and 100 case studies.

Economics of Scope

A condition in which a combined output of a Single Unit/Firm can produce more than Two different firms which produces the same product.

There are valid possibilities of such firms which has Economics of Scope. For Example: Automobile Production Companies like Ford, Toyota etc which are produced in there Industries and later on distributed worldwide. You can also infer that labor specialization creates an impact over economies of Scope. A specialized Labor can produce efficiently and cost effectively than hiring different labor for the same unit with higher costs. And an opposite Condition would be : 

Diseconomies of Scope

A condition in which a combined output of a Single Firm/Unit cannot produce as much as two different firms separately produces the Product.

This is a situation when firms are administered Separately and working Cost effectively in producing separate Units. In other words, some managements require separate financial and accounting management rather than a joint one. 

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