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Economies of Scope

Economies of scope refer to the cost advantages that a firm can realize by producing a range of different products or services. These cost advantages can arise from the shared use of common inputs or resources, such as production facilities, technology, or distribution networks.

For example, a company that produces a range of related products, such as different models of cars, may be able to realize economies of scope by using the same production facilities and supply chains for all of its products.

Economies of scope can allow a firm to produce a range of products at a lower long run average cost than if it produced each product separately, which can give the firm a competitive advantage.

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