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.
What will be an ideal response?
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.
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In order for someone to switch from borrowing to saving when the interest rate falls, it must be that current consumption is an inferior good.
Answer the following statement true (T) or false (F)
Before 1980, most U.S. corporations raised funds
A) in U.S. stock and bond markets or in foreign capital markets. B) in U.S. banks or in foreign capital markets. C) in U.S. stock and bond markets or in U.S. banks. D) in U.S. and foreign banks.
"The distribution of income should be determined by the government" is an example of a positive economic statement
Indicate whether the statement is true or false
A major reason for the existence of financial intermediaries is
A) transactions costs that would be incurred without their existence. B) the fees charged by dealers and brokers in direct finance are so high. C) the problem of symmetric information. D) to assist borrowers in buying securities in financial markets.