Economists have noted that businesses of a certain type tend to ...

[pepyto]

Economists have noted that businesses of a certain type tend to congregate geographically, attracting workers with skills in those fields. This, in turn, lures more firms seeking employees with those skills.
 
  Some examples include commercial banking, software development, and the automobile industry. What mechanism is at work here? Briefly explain how the mechanism works to the advantage of employers and employees.

Question 2

Refer to Figure 12-9. At price P4, the firm would produce
 
  A) Q3 units. B) Q4 units. C) Q5 units. D) Q6 units.

[duy1981999]

Answer to Question 1

The mechanism at work is a network externality. Employers will have access to a larger pool of skilled employees. At the same time, the efficiency of the job search for employees will be enhanced. In addition, industries are likely to draw ancillary services which could yield further efficiency gains for producers.

Answer to Question 2

B