Question

A food truck operator originally produced hamburgers and hotdogs. To serve the tastes of their various customers, the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well. Since the new products were introduced, average costs rose dramatically. The vendor is experiencing:__________.

a. Economies of scope
b. Diseconomies of scope
c. Economies of scale
d. Diseconomies of scale

Answer 1

The correct answer is (b) Dis-economies of scope

Step-by-step explanation:

Solution

Dis-economics of scope : This refers to a situation when the average cost of production is greater from the shared production of services than the average costs from the preceding independent production of the services.

The vendor here in this case is experiencing Dis-economics of scope.