Answer :

Economies of scope refer to the cost savings a company can achieve by producing multiple products using the same resources.

The concept is based on the idea that the average total cost of producing two different products together is lower than the sum of producing each product separately. This is because the company can take advantage of economies of scale by producing a larger quantity of goods at a lower cost per unit.
For example, if a company produces both shoes and handbags, it can use the same raw materials, equipment, and labor to make both products. By doing this, the company can achieve cost savings in the production process, which ultimately leads to a lower average total cost.

In short, economies of scope allow companies to leverage their resources to produce multiple products at a lower cost. This ultimately allows them to achieve a higher level of efficiency and profitability.

To summarize, economies of scope are a critical concept for firms looking to optimize their operations and remain competitive in today's market.

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