Question

If all firms in a city have lower costs than elsewhere because of better public infrastructure,...

  1. If all firms in a city have lower costs than elsewhere because of better public infrastructure, this is an example of
    1. urban or agglomeration economies
    2. dynamic localization economies
    3. static localization economies
    4. a stable equilibrium
    5. neoclassical technical change
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Answer #1

Agglomeration economies can be defined as the realized benefits in the form of lower cost due to availability of public infrastructure required for the firms. The firm faces lower cost because all related firms are situated in the same city basically. So firm get inputs easily in the same city which reduces the cost of production.

Hence it can be said that if all firms in a city have lower costs than elsewhere because of better public infrastructure, this is an example of urban or agglomeration economies.

Hence option first is the correct answer.

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