The Relationship of Cost Sub-additivity to Economies of Scale\Economies of Scope

Two other concepts that are similar to this additivity are Economies of Scale and Economies of Scope. Economies of Scale refers to the fact that within a certain range of output, the production function is increasing returns to scale (decreasing costs), that is, the larger the scale of production, the smaller the cost per unit of product, and the large-scale production by a single enterprise is more efficient than the simultaneous production by several smaller-scale enterprises. Economies of scope means that when a variety of products (or services) are provided simultaneously, the efficiency of the provision of a single enterprise is higher than when these products (or services) are provided separately by different enterprises. Economies of scale and scope are special cases of sub-additivity of success, and are sufficient but not necessary conditions for the emergence of natural monopolies. Before the theory of sub-additivity was proposed, economies of scale and scope were mainly used to explain natural monopolies.