14. What economic fact can best explain the clustering of some industries, such as banking and finance in New York City and high-technology computer production in Silicon Valley?
Clustering of industries at one place leads to development of infrastructure required for firm of these industries at the cluster area. This enable firms to lower their cost of operation by utilizing this shared infrastructure.
This benefit to firm due to clustering of industries at one place is referred to as external economies of scale.
The economic fact that can best explain the clustering of some industries, such as banking and finance in the New York City and high technology computer production in Silicon valley is external economies of scale.
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