Once an industry becomes established in a certain area firms that locate in that area gain advantages over firms located elsewhere,leading to lower costs of production.Economists refer to the lower costs that result from increases in the size of an industry in a certain area as
A)external economies.
B)positive externalities.
C)strategic advantages.
D)technological change.

Question

Quizplus · Accepted Answer

Economists refer to the lower costs that result from increases in the size of an industry in a certain area as external economies. This is because when an industry grows in a particular area, there are certain benefits that accrue to firms that locate within that area but are not available to firms located elsewhere, such as shared infrastructure, availability of skilled labor, and lower transportation costs. These benefits lead to lower costs of production for firms, which can increase their competitiveness and profitability.

Once an Industry Becomes Established in a Certain Area Firms