A necessary cost-side condition for a firm to implement a cross-subsidization pricing strategy is:
A) economies of scale.
B) economies of scope.
C) constant marginal cost.
D) limited capacity.

Question

Quizplus · Accepted Answer

Economies of scope allow a firm to produce multiple products more cheaply in combination than separately, which is essential for cross-subsidization pricing strategies. This is because cross-subsidization involves using profits from one product to subsidize the price of another, which is more feasible when there are cost savings from producing both products together.

A Necessary Cost-Side Condition for a Firm to Implement a Cross-Subsidization