Explain why in the case of economies of scope the production ...

[CORALGRILL2014]

Explain why in the case of economies of scope the production possibility frontier is bowed outward.
 
  What will be an ideal response?

Question 2

When the government charges an output tax to eliminate an externality, it forces the manufacturer to ________ the negative externality.
 
  A) charge customers for
  B) internalize
  C) stop producing
  D) increase the production of

[Ptupou85]

Answer to Question 1

With economies of scope a firm uses less resources if it produces i.e. two goods jointly instead of producing the two goods in two firms separately. This means that the firm can produce more of the two goods when the goods are produced jointly. Hence the bowed outward PPF.

Answer to Question 2

B