Which growth concept refers to cost-saving benefits from producing a broad range of related products by sharing facilities?

• A. barriers to entry
• B. diseconomies of scale
• C. economies of scope
• D. external growth

Answer: (C)

Economies of scope is the idea tested here: cost savings gained by producing a broad range of related products using shared facilities and inputs. When a company can reuse the same machines, labor, distribution networks, and marketing efforts across several related products, the average cost per unit drops compared with making each product separately. For example, a firm that makes both bread and pastries can use the same oven, packaging lines, and delivery system, spreading those costs over more products. The more the products rely on common resources, the greater the potential savings.

This differs from economies of scale, which focus on lowering costs by increasing the output of a single product. Barriers to entry are obstacles that prevent new competitors from entering a market, and external growth refers to expanding through mergers or acquisitions, not the cost advantages from producing a variety of related goods.