Question

The production process is such that, once programmer finishes coding so that the project ends, he has nothing to work on in the next few weeks during which designer and script writer will become busy on the next project. You decide to start a new business which develops computer programs to add special effects for movies. All the work can be done in weeks in which the programmer is idle.

This is an example of

		A) Diversification because an undervalued firm is identified
		B) Diversification to utilize internal capital markets
		C) Diversification to advance managerial careers
		D) Diversification to realize scope economie

Answer 1

Answer : Option D:Diversification to realize scope economie

Since If company can develop another program with the same programmer, the company can add a variety of new programs to their current line. Hence  scope of programs increases, offering a barrier to entry for new firms and a competitive synergy for the firm itself.