Final answer:
Cost-saving efficiencies from economies of scope come from producing various products using shared resources, which lowers the average total cost per unit, while economies of scale refer to the reduction in average cost as production volume increases, exemplified by businesses like Costco and Walmart.
Step-by-step explanation:
Economies of scope are cost-saving efficiencies derived from producing a variety of products rather than specializing in the production of a single product. These efficiencies are generated through shared or jointly utilized resources, such as production facilities, marketing efforts, and distribution channels, leading to a decrease in the average total cost per unit.
Economies of scale, on the other hand, refer to the cost-saving benefits companies achieve when production becomes efficient as the scale of production increases. As the volume of production grows, the fixed costs are spread over more units, which lowers the average cost per unit. This relationship is beneficial within industries where large-scale production is possible, and as exemplified by large retailers like Costco or Walmart, who are able to provide lower prices due to their economies of scale.
The theory of comparative advantage does not contradict the utilization of economies of scale and scope; rather, they help to expand the theory by illustrating how a country can benefit from specializing in certain products or services where they have a comparative advantage, while still reaping the benefits of large-scale production and variety in offerings.