What is the difference between economies of scale and economies of scope? Scale

Question

What is the difference between economies of scale and economies of scope?

Scale refers to the magnitude or size of the operation, while scope refers to the reach of defined savings
within the value chain.

Scale refers to the extent of change, while scope refers to the possibilities of change.

Scale is about dimensions, while scope is about the capacity available for production capabilities.

Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly
from strategic fit along the value chains of related businesses.

None of these. Scale and scope mean the same thing and the only difference is the extent to which they
have some use-value.

Scale refers to the magnitude or size of the operation, while scope refers to the reach of defined savings
within the value chain.

Scale refers to the extent of change, while scope refers to the possibilities of change.

Scale is about dimensions, while scope is about the capacity available for production capabilities.

Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly
from strategic fit along the value chains of related businesses.

None of these. Scale and scope mean the same thing and the only difference is the extent to which they
have some use-value.

Explanation / Answer

Economies of scale can be defined as the cost advantage that accrues to a firm due to an incease in its output. This happens because the fixed costs gets divided between a larger number of goods produced and thus the per unit cost falls. Economies of scale results in higher operational efficiencies as well.

Economies of scope can be defined as the cost advantage that accrues to a firm when it produces two or more than two separate products. The cost advantage is that the cost of producing distinct goods together is less than the cost of producing each goods separately.

Hence the answer is option "d" - Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related businesses.

Products that have a strategic fit will reduce costs if produced together. This way they add more value in the production process and thus enhance the value chain.

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