If a pharmaceutical firm is researching ways to improve its heartburn

If a pharmaceutical firm is researching ways to improve its heartburn medicine and discovers a technique that will improve its allergy medicine, one could conclude that economies of scope exist in that industry.

Indicate whether the statement is true or false

ANSWER

True . Economies of scope imply that the cost of producing two goods together is less than the cost of producing them separately. In this case, the costs of producing heartburn medicine and allergy medicine are lower for the firm that produces both.