How can a firm benefit from external economies?

A. Increasing its expenditure on advertising
B. Increasing the workforce
C. Locating in an area in which the industry is already established
D. Merging with another domestic firm engaged in the same industry

Correct Answer:

Option C – Locating in an area in which the industry is already established

Explanation

External economies is the benefit which a firm derives from the centration of similar firms which leads to an increase in output and a reduction in the unit cost. The firm will benefit from the area where the industry is located