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Commercial bakeries typically sell a variety of products (breads, ro

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Commercial bakeries typically sell a variety of products
(breads, rolls, muffins, cakes, etc.) to local grocery stores.
There are substantial economies of scale in production of
each one of the bakery products, which makes it cost-
effective to specialize in the production of just one
product. Grocery stores, however, prefer to buy from
multiproduct bakeries that sell a full line of bakery
products. How might managers organize production to take
advantage of the economies of scale and scope in
production and marketing that exist in the baking industry?
Solution
the cost to produce 1000 pairs of jeans in Indonesia is as
follows:
Q= 2 K0.8 L0.2 , where the wage for labor is $3 and cost
of capital is $12,
unit price= 2(0.8X 12) (0.2X3)
= 2(9.6) ( 0.6)
=$11.52
cost for 1000 units= 1000 X 11.52= $11,520
the cost in US is as follows:
Q= 2 K0.8 L0.2 , where the wage for labor is $8 and cost
of capital is $4,

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Commercial bakeries typically sell a variety of products (breads, rolls, muffins, cakes, etc.) to local grocery stores. There are substantial economies of scale in production of each one of the bakery products, which makes it cost effective to specialize in the production of just one product. Grocery stores, however, prefer to buy from multiproduct bakeries that sell a full line of bakery products. How might managers organize production to take advantage of the economies of scale and scope in production and marketing that exist in the baking industry? Solution the cost to produce 1000 pairs ...
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Anonymous
Awesome! Perfect study aid.

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