Question

Submit answers to the following question. 1. The JK Amish Corporation produces 1,200 wood cabinets and 600 wood desks per year, the total cost being $40,000. If the firm produced 1,200 wood cabinets only, the cost would be $28,000. If the firm produced 600 wood desks only, the cost would be $15,000. a. Calculate the degree of economies of scope. b. What % of cost savings exist? Where the cost-saving come from?

Answer 1

[cca) + c (12) - c19, +22 cc1, +92). CoEcenme of scobce c(4) is cast of producing good y, separately. c(9₂) il cost of producing gud 22 separately. cc11 +22) is cent of produring good I, and good 12 together. Let 9, = cabinet 12 = dest ((91 +92) = $40000 (1.) = $28000 (92) = disow. Economics of Icebes 28000 + 1500 40000 Economies of scope = 0.075 Economies of scope = 7.5%.. 6 7.5.1. of cust loving exist, he because the cost of I producing desk and cabinet together is 7.57. less than cost of producing them separately