why cities exist

Question 1

oppurtunity cost

Answer 1

product b/ product youre trying to find it for

Question 2

examples of economies of scale

Answer 2

labor specialisation, invisible inputs eg large containers

Question 3

what is AC of production

Answer 3

av capital cost + av labor cost

Question 4

av labor cost

Answer 4

wage / quantity

Question 5

When do cities emerge?

Answer 5

1. Agricultural Surplus
2. Comparative advantage
   – Trade due to differences in opportunity costs - specialisation
3. Economies of scale in exchange
   – Concentration of trading firms - trading cities
4. Economies of scale in production – Concentration of production in factories - factory cities

Question 6

Key features of the Industrial Revolution

Answer 6

• Technological advances in agricultural
  sector released people from farming,
  so people could ‘urbanize’
  -Technological breakthrough - massive
  economies of scale in production
• Decline in transport costs

Question 7

Why might firms sharing intermediate inputs lead to a cluster

Answer 7

• Economies of scale : by sharing a single supplier final good producers are able to exploit economies of scale and get the good at a lower average cost
• Face time : Intermediate goods need face to face interaction to ensure input is suited to final product

Question 8

benefit of a cluster of labor

Answer 8

• Low search cost
• low relocation cost

Question 9

Codified knowledge

Answer 9

easily articulated, stored and accessed (e.g. information in Wikipedia or manual); can be patented

Question 10

Tacit knowledge

Answer 10

Cannot be codified
Rooted in context, experience, practice, and values
Hard to communicate passed on through
socialization, mentoring, friendship, etc.Requires face
to face interactions

Question 11

example of an area benefitted by tacit knowledge

Answer 11

face-to-face interactions, and resulting knowledge flows a large part
of what made Silicon Valley the dominant technology hub it is today

Question 12

problem with knowledge spillovers

Answer 12

Knowledge spillovers are difficult to measure: “knowledge flows are invisible, they leave no paper trail by which they may be measured and tracked” (Krugman, 1991)

Question 13

what is joint labor supply - a benefit of firms clustering

Answer 13

when there are 2 workers in one household, they will prefer to move into a city with lots of different types of industries. The workers are willing to accept lower wages to live in a location like this

Question 14

why is learning a benefit of firms clustering

Answer 14

workers learn by imitating - increase in human capital, will increase their wages

Question 15

4 benefits of firms clustering

Answer 15

Sharing: Intermediate Input Producers: This mechanism involves businesses in the same industry or related industries sharing suppliers or producers of intermediate goods or materials. For example, multiple manufacturing firms in a clustered area may purchase components from the same suppliers, allowing them to benefit from economies of scale, reduced transportation costs, and specialized expertise.
Sharing: A Common Labour Pool: In this mechanism, businesses within a clustered area draw from the same pool of available workers. This can occur when multiple companies in similar industries or sectors are located in close proximity to each other. By sharing a labor pool, businesses can access a larger talent pool, reduce recruitment costs, and foster collaboration and knowledge sharing among employees. large cities offer better employment opportunities for two-earner families
Matching: Workers to Firms: This mechanism involves the efficient matching of workers with firms within a clustered area. Clustering can create a concentration of job opportunities within specific industries or sectors, making it easier for workers with relevant skills and expertise to find employment. Additionally, firms benefit from access to a pool of qualified workers, facilitating the recruitment process and enhancing productivity.
Learning: Knowledge Exchange: Clustering facilitates the exchange of knowledge, ideas, and best practices among businesses, workers, and other stakeholders within a concentrated geographic area. This mechanism fosters innovation, collaboration, and entrepreneurship by enabling individuals and organizations to learn from each other, share insights, and collaborate on projects. Knowledge exchange within clusters can lead to the development of new technologies, processes, and business models, driving economic growth and competitiveness