Question

What do short-run economies of scale and economies of scope mean? Explain using a health care example.

Answer 1

Economies of scale is nothing but the average cost reduces with increasing in production. Economies of scope is nothing but the cost saved when two or more goods are produced at a single venture rather than producing them differently and for example in the healthcare the average cost of treating patients reduced when you treat more patients because basically you have to use the same equipment and when you set up a hospital not for just treating kidney diseasesis the hospital also treats the liver diseases then it is economies of scope because the two types of diseases treated at one place there would be a savings in cost because the land value in the building value is almost same and this is an example of economies of scope in healthcare