Page 14 - CL Industry Analysis
P. 14
Scope & Scale Economies
Economies of scope result in a decrease in the average
total cost of production
Economies of scope result from increasing the number of
different goods produced. For example, Chase Distillery can
produce both Vodka and Gin at a lower average expense
than what it would cost two separate firms to produce each
of the products separately. This is because Chase vodka and
gin are able to share the use of raw product ‘potatoes’ from
Chase home farm, preparation facilities and so forth during
production.
