Question

Amazon originally started as an online bookseller, but over time, developed into selling millions of products and provides a platform for other firms to sell their goods. Is this an example of economies of scope? Explain.

Answer 1

Solution

Yes, this is an example of economies of scope.

Economies of Scope : It is a phenomena where the a company gains considerably by producing two or more different products.It's cost of producing multiple goods separately is more than cost of producing together using the same infrastructure and or platform etc.,

So,here as mentioned above Amazon initially started as an online book seller.Over the time,as their reach increased,they diversified into selling million other goods.So, they are using their same resources but selling millions of other products too on the platform.Ex: They use the same infrastructure,same employees,same operation procedures etc., to sell all the products in the same manner as the books.

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