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What is the difference between Economies of Scale and Economies of Scope?

Economics Dec 08, 2020

What is the difference between Economies of Scale and Economies of Scope?

Expert Solution

There is a significant disparity between economies of scope and economies of scale. Economies of scale focus on reducing the average cost with an increment in the output of a particular service and goods, thus, as output increases, the average cost falls. On the contrary, economies of scope focus on reducing the total costs while producing various products while sharing resources. For example, one can produce plastic eating utensils and plastic cups at the same time while sharing factories and raw materials, this reduces the cost of making the two products separately. So, both economies of scale and economies of scope reduce cost but in different ways.

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