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.

Quizplus · Accepted Answer

Economies of scope exist when the average cost of producing two or more goods or services together is less than the average cost of producing them separately. In this case, ACb + s < ACb + ACs, which means that the average cost of producing both banking and securities services together is less than the average cost of producing them separately.

Which of the Following Is Consistent with Economies of Scope