Give a real life example of economies of scopeSolutionEconom

Give a real life example of economies of scope.

Solution

Economies of scope states that as a firm produces more number of different goods, its total average cost of production goes down. That is, as a firm expands the product scope of its business, its total average cost falls.

An example is P&G which produces both shampoo and body wash. Total average cost of P&G\'s producing both body wash and shampoo is lower compared to a situation when two individual firms produce one product each.