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
Economies of scope arise when producing two or more products together costs less than producing each separately; diseconomies of scope arise when producing them together costs more.
Producing A and B separately would cost (90 + 60 = 150), whereas producing them together costs (160) per unit of A and B combined. Since the joint cost of 160 is greater than the separate total of 150, combining production actually raises cost rather than lowering it.
A cost increase from producing different products together is the defining sign of diseconomies of scope. It is not economies of scope (which would need the joint cost to be below 150), and it is not economies or diseconomies of scale, which concern changing the volume of a single product, not producing different products together.
Hence it exhibits signs of diseconomies of scope.
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