Question

14. If firms in a particular industry are located in the same area, the resulting availability of skilled labor is an example of

a. an external economy.

b. an internal economy.

c. increasing returns to scale.

d. the invisible hand.

Answer 1

Answer : a ) an external economy . Other option are incorrect because , internal enomony are firm specific , or caused by internally , while external economy occur based on large changes outsite of the firm . So when firms in particular industry are located in the same area , the resulting availability of skilled labor is an example of external economy . External economics are generally described as having an effect on the whole industry .

Increasing return take place in the same industry and it is the rate of return from inputs so option is incorrect .

Invisible hands is used by Adam Smith to describe his belief that individuals seeking their economic self interest actually benefit society more than they would if they tried to benefit society directly . so this option is incorrect .