The variety of Riverside Ranger logo Tshirts includes 12 dif

The variety of Riverside Ranger logo T-shirts includes 12 different designs. Setup between designs takes one hour (and $18,000), and, after setting up, you can produce 1,000 units of a particular design per hour (at a cost of $8,000). Does this production exhibit scale economies or scope economies?

Solution

It is the case of Scope economies.

Explanation:- Economies of scope states that as a result of increasing the number of units produced, the average total cost of production decreases. In the instant case, average total cost decreased from $ 18000 to $ 8000 as a result of increasing the number of units to 1000 units.

Conclusion:- This production exhibit scope economies.