Question

Blaze Corp., a car company, shared its costs of producing cars. It did so by introducing the production of car accessories that are used by customers to upgrade or customize their cars. Blaze Corp. started selling car accessories such as engine oils, wheels, and music player and thus shared its market research costs between cars and car accessories. This led to a definite decrease in the overall cost of production. This scenario best illustrates _____.

Answer 1

The scenario above that describes Blaze Corp's strategy is best known as Economies of Scope.

Economies of Scope:

• Refers to producing multiple goods in order to make savings on costs
• Is possible when the cost of producing multiple goods is less than the cost of producing those goods individually

Blaze Corp. is selling both car and car accessories and as such, is making cost savings on research costs. This is therefore economies of scope because savings are being made by producing multiple goods.

In conclusion, this scenario best shows economies of scope.

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