Consider a mountainous area that is suitable for skiing in the winter and mountain bike riding on paths in the summer. Both activities require getting the skiers and bikers to the top of various hills. If a ski resort is built with lifts, the cost of transporting a 1,000 skiers to the top of the hills is $40,000 a day. If a biking facility is built, the cost to get 1,000 bikers to the top of the hills is $30,000 a day. If both cases, the facilities are not used in the offseason. However, a resort that allows both has costs of $50,000 to move 1,000 of each type of user.
What is the cost savings due to economies of scope in this case?
Cost of transporting 1000 skiers exclusively = $40000 per day
Cost of transporting 1000 bikers exclusively = $30000 per day
Since both activities are exclusive and off season, a modified ski resort is build which permits transportation of both types of user.
Cost of transporting 1000 bikers or skiers = $50000 per day
Hence cost of savings (in one full year comprising of both seasons) by building single unit instead of building two separate ski resorts
= $40000 + $30000 - $50000 = $20000 / day
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