It costs a firm ₹ 90 per unit to produce product A, and ₹ 60 per unit to produce B individually. If the firm can produce both products together at ₹ 160 per unit of product A and B, this exhibits signs of:
diseconomies of scope
Option 3 — diseconomies of scope is correct.
Economies of scope concern the cost of producing a variety of products together versus separately. If the joint cost of making two products together is lower than the sum of making each alone, economies of scope exist; if joint production costs more, there are diseconomies of scope. (This is different from economies of scale, which concern the cost per unit as the volume of a single product rises.)
Here, produced separately the two products cost ₹ 90 + ₹ 60 = ₹ 150 in total. Produced together the cost is ₹ 160, which is higher than ₹ 150. Because combining the product lines raises rather than lowers total cost, the firm is showing diseconomies of scope.
Why the other options are wrong: Economies of scope (1) would require joint cost below ₹ 150. Options (2) and (4) refer to scale — changes in per-unit cost with output volume — which the data on two different products does not address.
Takeaway: Scope compares joint versus separate production of different goods; joint cost above the separate total signals diseconomies of scope.
Similar Questions
Match the production functions List - I with the return to scale List - II.
List - I (Production function) List - II (Return to scale) (a) \( Q = 10\,K^{0.5}L^{0.4}E^{0.15}M^{0.1} \) (i) increasing (b) \( Q = 12\,K^{0.5}L^{0.5} \) (ii) constant (c) \( Q = 100\,K + 15\,L \) (iii) decreasing (d) \( Q = 40\,K^{0.3}L^{0.5} \) Code :
Managerial economics is concerned with which combination of the following ?
(a) Investment Analysis and Decisions
(b) Production Behaviour and Cost Analysis
(c) Input Reward Analysis and Decisions
(d) Economic Environment Analysis
Code :
When P0 and P1 and Q0 and Q1 denote before and after change in the price and quantity respectively and in both the situations, total outlay remains the same, which of the following formulae give the similar value of the arc price - elasticity of demand ?
(a) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}+P_{1}}{Q_{0}+Q_{1}}\)
(b) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{1}}\)
(c) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{0}}\)
(d) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{1}}\)
(e) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{0}}\)
Code :
In case the producer's equilibrium shifts to a higher isoquant due to decrease in price of an input, the curve combining the successive equilibrium positions is known as :
Which one of the following statements is not correct ?
For the following two statements of Assertion (A) and Reasoning (R), indicate the correct code :
Assertion (A) : Ridge Lines in isoquant map set the limits for the positive productivities of the respective inputs used in the production process.
Reasoning (R) : Isoquants will slope positively if the use of an input is increased beyond the limit set by the ridge lines.
Code :
If a 100% scale-efficient plant has 92% technical efficiency and 88.5% allocative-efficiency, then its overall efficiency will be :
Statement (I): The elasticity of factor substitution is formally defined as the percentage change in the capital-labour ratio divided by the percentage change in the marginal rate of technical substitution.
Statement (II): \(Q = K^{0.5} L^{0.3}\) is a production function where Q = output, K = units of capital and L = units of labour. This production function shows the application of increasing returns to scale.
Codes:
Law of Diminishing Return applies when the gaps among the successive ‘multiple-level of output’ isoquants:
Production function is not based on the assumption of the:
Important Questions from Production Function
For the following two statements of Assertion (A) and Reasoning (R) suggest the correct code:
Assertion (A): Low initial price regarded as the principal means for entering into mass market for some new products.
Reasoning (R): Firms generally enter into production of new products with excess capacity of the plant initially.
Code:
Indicate the correct code from the following types of the long run average cost curves on which the minimum average cost of production in long run can be determined:
(i) Long run average cost curve under normal production function
(ii) Long run average cost curve under linearly homogeneous production function
(iii) Planning curve
(iv) Envelope curve
Choose the correct answer from the code given below :
Which of the following is not an attribute of production function?
Which of the following is an example of non-durable goods?
What is constant along an isoquant?
