What are economies of scope associated with?

Economies of scope occur when a company can produce multiple products more efficiently together than separately. This concept is tied to the idea that certain resources or capabilities are shared across different products, leading to cost savings and increased efficiency. When a firm diversifies its product offerings, it can spread its fixed costs (such as administration, marketing, and research and development) over a larger range of products, thereby reducing the average cost per product.

For example, a manufacturer that produces both coffee and tea may find that it can use the same packaging machinery, distribution networks, and marketing strategies for both products, which allows it to lower production costs per unit than if it were to produce each product independently. This advantage stems from the operational synergies created through offering a broader product mix.

On the other hand, the other options relate to different concepts. Cost savings from outsourcing production deals with shifting production externally, while increased revenue by raising prices focuses on demand-side pricing strategies rather than efficiencies achieved through varied product lines. Efficiency gains from operating within a single market pertains to the concentration of resources in one area, which does not leverage the benefits of producing multiple different products.