An automobile company modifies its existing automated production line so that it can manufacture two more models of cars using the same facility. This shows that the automobile manufacturer is planning to take advantage of ________.
A) economies of scope
B) deferred revenues
C) transaction costs
D) elasticity of supply

Question

Quizplus · Accepted Answer

Economies of scope refer to the cost advantages that arise when a company produces multiple products using the same resources or processes. By modifying its automated production line to manufacture two more models of cars, the automobile company is taking advantage of economies of scope. This allows the company to spread the fixed costs of the production line across a larger number of units, which can result in lower per-unit costs and increased efficiency. Deferred revenues, transaction costs, and elasticity of supply are not directly relevant to this scenario.

An Automobile Company Modifies Its Existing Automated Production Line So