week 2

original work only

Economiesof Scope and Scale

What are they? What is the key difference between an economy of scale and an economy of
scope?
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One source of growth is external growth from a merger and/or acquisition. Often
merger/acquisition are justified on the basis of the expected benefits from ‘synergies’ created by
the merger/acquisition. Economists know these as economies of scale and economies of scope.

Select one of the below mergers and acquisitions and determine if the synergies come from

economies of scope or economies of scale. Make sure you provide a clear explanation of the

difference between economies of scope and economies of scale. The link above is to some help

provided by Dr Cruceru.

a) Sirius XM acquires Pandora;

b) the yet to be concluded merger of Sprint, T-Mobile and Metro PCS;​ (this is the merger I chose)***

c) the merger of Strayer University and Capella; or

d) the Renault/Nissan/Mitsubishi Alliance.

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