Commercial bakeries typically sell a variety of products (breads, rolls, muffins, cakes, etc.) to local grocery stores. There are substantial economies of scale in the production of each one of the bakery products, which makes it cost-effective for bakeries 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?
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