Which of the following would be the most probable reason for a firm to diversify________? A....
Which of the following would be the most probable reason for a firm to diversify________?
| A. |
To increase social benefits. |
|
| B. |
To promote the production of goods that are complementary to the goods that it produces. |
|
| C. |
To internalize negative externalities. |
|
| D. |
To promote the production of goods that are similar to the goods that it already produces. |
Homework Answers
Ans) In general there are three main reasons for a firm to diversify its operations÷
- Creating value ÷ value creation through economies of scope, market power etc gives competitive advantage to the firm.
- To neutralise another firms strength .
- To Decrease a firm's value.
Option d.
(Economies of scope mean to produce another product which is similar to the product that firm is already making. By doing this, firm can make another product at low cost which would have costed more if produced separately. It also gives competitive advantage to the firm. Eg- a firm launches new kids clothing line which was already producing men and women apparels.)
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