Chapt 3 - Garrett Barnes Chapt 3 problems 3. Explain how...

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Garrett Barnes Chapt 3 problems 3. Explain how the three major centripetal or centralizing economic forces can interact to create the phenomenon known as cumulative causation. The three major centripetal forces are economies of scale, economies of agglomeration, and positive locational externalities. Economies of scale means that it is cheaper and more efficient to produce in large quantities. Agglomeration economies are cost or productivity advantages to the clustering of firms or work sites physically near each other. Positive locational externalities occurs when one firm benefits from the nearby location of another firm without the first firm being able to fully profit from this benefit. As more firms cluster together, the local population and production gets even bigger, providing a larger local market for all goods and services. This allows larger-scale production, which allows lower cost and more efficient production. Thus, in the presence of scale economies, there can be an external benefit merely to the location of firms near each other, even if they are not directly related to one another. In other words, scale economies can integrate the
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Chapt 3 - Garrett Barnes Chapt 3 problems 3. Explain how...

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