Suppose a firm has the ability to produce soap, toothpaste, or both. if the firm produces q subscript upper s units of soap and no toothpaste, then the total cost of production will be $30 thousand. if instead the firm produces q subscript upper t units of toothpaste and no soap, then the total cost of production will be $34 thousand. however, if the firm produces both q subscript upper s units of soap and q subscript upper t units of toothpaste, then the firm's total cost of production will be $36 thousand. does this firm potentially experience economies of scope, diseconomies of scope, or no economies of scope? this firm potentially experiences economies of scope . what is the firm's degree of economies of scope? the degree to which this firm potentially experiences

a) This firm potentially experience economies of scope.

b) 0,77

Explanation:

a) A company faces an economiy of scope whenever the cost of producing a variety of products is lower than the sum of each producing cost if they are produced in a stand-alone production line.

In this case the sum of the stand-alone costs is = $30,000+$34,000= $64,000

And when they are produced  together the total production cost is 36,000, so we are facing an economy of scope.

b) to calculate the degree of scope economy we apply the following formula=

(Cost of producing Toothpaste alone + Cost of producing Soap alone- Cost of combinated production)/ Cost of combinated production=

(30,000+34,000-36,000)/(36,000)=0,77

It's a positive degree so we are facing an economy of scope

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Explanation: