The Statement: "Economies of Scope in Shared Resources Do Not

question 7

Multiple Choice

The statement: "Economies of scope in shared resources do not provide a sufficient justification for diversification" is:

• A)Correct: Cost savings form shared resources are of little value unless there are also organizational capabilities that can be transferred between the businesses
• B)Correct: to justify diversification economies of scope need to be supported by transactions costs in the market for the particular resources
• C)Incorrect: economies of scope are sufficient grounds for diversification on their own
• D)Incorrect: the benefits from economies of scope need to exceed the administrative costs of the corporate HQ.

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