Question

Do you think there are economies of scale and economies of scope in health care markets? Answer providing examples.

Answer 1

Economies of scope and economies of scale are two concepts that are related to production and through these concepts, the cost that a firm has to incur during production can be reduced and the companies in the health care market can also use these techniques.
Economies of scale are a production technique in which a firm produces a large number of units of their products together so that the price of a single unit of product can be reduced. The companies of the health care market also use this technique for their benefits. For example, a company in the health care market selling medicine for controlling blood pressure can produce large units of medicine so that the price of their single pack of medicine can be reduced.
Economies of scope are another technique used by the companies to control the cost related to production. However, this technique is different from economies of scale, in this technique the companies can lower down the cost that is incurred during production by producing similar kinds of goods that require the same kind of input. So, the input can be used to produce both the goods and there is no need to buy or produce the input for both the goods separately. For example, a company in the health care market producing different types of medicines wants to increase their earning capacity so, for this in place of setting a new branch of their company they can introduce a new variety of the medicines that require the same input as are required by the medicines they are producing.