![]() The economies of scope can result from sharing of the same inputs, joint marketing or management. There will be no difference in the output of X and Y, irrespective of joint production or producing them separately. If PPC was a straight line, then, it means that the firm does not experience economies of scope. It is better to produce both, than to produce only chicken or only eggs. They can benefit from joint production to earn economies of scope because both require the same inputs. Poultry farms produce both eggs and chicken as products. To illustrate with an example, some products like chicken and eggs can be produced together for additional benefits. If these products were produced by different firms, then the output of both X and Y would be less because there will be no economies of scope. These are known as the Economies of Scope which allows the firm to produce more of both products with joint production from given inputs. The joint production of products X and Y has some cost benefits. The PPC is concave to the origin and the MRT increases as we move along the PPC. The shape of PPC and its slope (MRT) shows the existence of economies of scope. Therefore, every point on the production possibility curve shows a different price ratio of goods (MRT/MOC/ slope). The output mix or the change in output ( dY/dX) will be equal to the ratio of prices (and the ratio of marginal costs) of both goods. This implies that the price ratios of two goods are equal to the ratio of their marginal costs. The price is determined by the marginal costs of products under perfect competition.
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