Question

If a diversified firm had three businesses and these companies shared a common marketing and service operation, as well as common technology and development, this would be an example of economies of scope:__________

Answer 1

Answer:

true, it reduces costs by sharing activities

Explanation:

In this case, since the diversified firm has three different businesses that share common marketing and service operations, it is benefiting from a type of economies of scope called shared activities.

Economies of scope basically refers to saving money when producing two or more goods or services by using common production processes in order to reduce costs. The joint production of the goods or services will cost less than if the company produced each one separately.

This company is benefiting from using shared activities because one single marketing unit and another single operations unit will serve the three separate businesses.