Answer to Question #104155 in Management for peter

Question

Explain the difference between ‘economies of scale’ and ‘economies of scope’. use
an example of each relating to banks to support the answers.

Answer 1

Economies of scope means savings in cost due to the production of two or more distinct products, using same operations. For example, there is economies of scope, if the bank provides more different products and services to customers decreasing total costs. Economies of scale refers to savings in the cost due to increase in output produced. In this case, for example, the bank can open more branches to decrease average total costs.