Which of the following economies of scope do not have the potential for generating positive returns for a firm's equity holders since the economies of scope can be realized by outside equity holders at a low cost by investing in a diversified portfolio of stock?
A) Shared activities
B) Diversification to maximize the size of a firm
C) Internal capital allocation
D) Exploiting market power

Question

Quizplus · Accepted Answer

Diversification to maximize the size of a firm can be easily replicated by outside equity holders through diversification in a low-cost manner, and therefore does not generate positive returns for a firm's equity holders.

Which of the Following Economies of Scope Do Not Have