Question

• Think about returns to a factor, economies of scope and scale. Find a recent article that discusses one or more of these topics and how it relates to a real life situation (the article should be no older than 5 years) and prepare a 1-2 page summary of the article (include in text citations and References).
• Along with this summary, prepare 2-3 discussion questions for peers to answer. The summaries should also reflect key points from the assigned reading including in text citations and a Reference section.

Answer 1

Economies of scale and scope in publicly funded biomedical and health research.

Economies of scale mean that cost advantage accrues to a company when there is an increased output of goods being manufactured by it. This happens due to the inverse relationship between the average cost per unit and output level. Economies of scope means that average total cost of a company’s production will decline with an increase in the variety of goods produced.

Summary of the article: A review of economic literature was undertaken and the literature discussed models for analyzing economies of scale and/or scope in research.

Empirical studies related to economies of scale and scope in biomedical and health research was reviewed. The studies that are at the level of research institutions and universities points out to positive economies of scale in biomedical and health research and so these studies discards the existence of diseconomies of scale or constant returns to scale in biomedical and health research. The studies that are at the level of laboratories and individual research units have provided mixed results.

In the context of biomedical and health research economies of scale leads to more efficient use of lumpy items of equipment or buildings or of other fixed costs that are location-specific.

With regards to economies of scope majority of the studies suggests positive economies of scope than diseconomies. Economies of scope can be thought of as the synergies that arise by undertaking different kinds of research side by side.

Reference:

https://health-policy-systems.biomedcentral.com/articles/10.1186/s12961-016-0167-3

Discussion question:

1. Review the article summary and answer the question – Do economies of scale and scope exist in biomedical and health research?