The use of mass advertising media enable a firm to enjoy

Step 1: Analyze the question The question asks which type of economy of scale a firm enjoys when it uses mass advertising media (TV, radio, newspapers, billboards).

Step 2: Explain the concept Economies of scale are the cost advantages a firm gains as it expands production. The main types are:

• Managerial economies: Large firms can hire specialist managers, such as a production manager or a marketing manager, who make operations more efficient.
• Financial economies: Large firms can get loans more easily and at lower interest rates because banks see them as less risky.
• Marketing economies: Large firms can spread the cost of advertising, distribution and sales over a large output. They can also buy in bulk and use mass advertising media, so the advertising cost per unit of product is very low.
• Technical economies: Large firms can use advanced machinery and large-scale production methods.
• Welfare economies: Large firms can provide staff facilities such as clinics, canteens and housing.

Step 3: Solve Mass advertising media such as national TV, radio and newspapers are expensive. A large firm can afford them, and because it sells in large quantities, the advertising cost per unit sold is small. This advantage relates to promoting and selling products, which is marketing.

• A is wrong because it relates to hiring specialist managers.
• B is wrong because it relates to access to credit.
• D is wrong because it relates to staff welfare.

Answer: C. marketing economies

Exam tip: Match the keyword in the question to the type of economy: advertising, distribution and bulk buying point to marketing. Loans and credit point to financial. Specialist staff point to managerial. Machinery points to technical.