Economies of Scope Are Said to Exist When

question 32

Multiple Choice

Economies of scope are said to exist when:

• A) one firm produces many products rather than separate firms for each.
• B) many firms produce many products rather than one firm producing all.
• C) many firms produce a single product rather than one firm.
• D) one firm produces multiple products rather than separate firms producing all.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much contributes towards covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent, insurance, and salaries, over a certain period.

Composite Unit

A composite unit is an accounting measurement that combines the attributes of multiple units of a similar product or service into a single representation for easier management or evaluation.

Sales Mix

The proportion of different products or services that make up a company's total sales, affecting overall profitability and performance.