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Suppose a firm can produce 100 units of Thingies using 6 labourers and 4 machines. Separately, the same firm could produce 100 units of Doo-Hickeys...
Suppose a firm can produce 100 units of Thingies using 6 labourers and 4 machines. Separately,the same firm could produce 100 units of Doo-Hickeys using 4 labourers and 5 machines.The production manager believes that if the firm made Thingies and Doo-Hickeys together thatthe firm could produce 50 units of Thingies and 50 units of Doo-Hickeys using 4.5 labourers and 5machines.Suppose that labourers cost $40 and the rental rate of capital is $35.If the production manager is correct are there economies of scope, diseconomies of scope, or noeconomies of scope by jointly producing Thingies and Doo-Hickeys?
