A Corporation produces 1000 wood cabinets and 500 wood desks per year, for total cost of $30,000. It has been estimated that if the firm produced 1000 wood cabinets only, the cost would be $23,000, and if the firm produced 500 wood desks only, the cost would be $11,000.
a. Calculate the degree of economies of scope and interpret your findings.
b. What explains economies of scope and economies of scale in production? What is the difference between economies of scope and economies of scale? Provide at least two examples for each case.