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In: Operations Management

2. Would a firm that simply expanded its current product line gain economies of scope? Might...

2. Would a firm that simply expanded its current product line gain economies of scope? Might highly flexible and proficient labor also offer economies of scope?

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Expert Solution

No, a firm that had simply expanded its current product line cannot gain economies of scope because to gain economies of scope there are several other factors which needs to be considered such as are the products related, are the labours who were involved in the manufacturing other products manufacturing this product as well, what are the quantities of product in newly expanded product line is being produced etc.

Economies of scope focuses of related diversification and if you require a new manufacturing unit or labours with other different skills then this concept of economics is not going to work for you.

Yes, highly flexible and proficient labor can help in the achievement of economies of scope because such labors can work at different machines and can be used in the manufacturing of maybe not so closely related products which will ultimately bring the long run average and marginal cost of a company down.

keosha answered 1 year ago
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