A computer company produces hardware and software using the same facility. (i.e., with the same L and K). The total cost of producing software (S) and hardware (H) equals:

Question

TC = a S + b H - d S H,
where a, b, and d are positive constants. Are there economies of scope in the production of H and S? Explain why or why not.

Answer 1

see my earlier posts to this very question.