Which of the following is consistent with economies of scope? The subscript "b" refers to a banking firm, "s" for a securities firm, "AC" is average costs and "TC" is total costs. A)AC_{b + s} AC_b + AC_s. B)AC_{b + s} = AC_b + AC_s. C)AC_{b + s}

Question

Which of the following is consistent with economies of scope? The subscript "b" refers to a banking firm, "s" for a securities firm, "AC" is average costs and "TC" is total costs. A)AC_{b + s} > AC_b + AC_s. B)AC_{b + s} = AC_b + AC_s. C)AC_{b + s} < AC_b + AC_s. D)TC_{b + s} < TC_b + TC_s. E)TC_{b + s} > TC_b + TC_s.

Quizplus · Accepted Answer

Economies of scope occur when producing a range of products together is cheaper than producing each one of them on its own. Choice C correctly reflects this by showing that the combined average costs of producing banking and securities services together are less than the sum of producing them separately.

Which of the Following Is Consistent with Economies of Scope