What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately? of Select one:

a. Diminishing average fixed costs

b. Cost complementarity

c. Economies of scale

d. Economies of scope

Answer:

Option D is correct - Economies of scope

Economies of scope are experienced when the cost of producing two different goods together is less than producing them separately. This happens because a firm produces two different goods using the same resources and factors of production which otherwise it would have to set up an entire firm for production of a different good.

Thus when production of two different goods costs less than producing them separately (with different resources) then economies of scope experience. Here we can see that the two goods are Q1 and Q2 and the firm experiences economies of scope in producing them together.