Question

17. For each pair of variables, indicate whether the relationship is positive, negative, neutral, or ambiguous. Relationship Parameter economies of scale in intermediate input economies of scale in final good job switching cost for isolated job number of workers in cluster number of workers in cluster commuting cost per km in cluster Choice Variable number of firms in cluster number of firms in cluster expected utility for isolated job average skills mismatch average training cost number of firms in cluster

Answer 1

1. Positive relationship: when economies of scale in intermediate inputs exist implying that cost of production in lower thus number of firms in cluster increase.
2. Positive relationship: given there economies of scale in final good imply that the cost of production has fallen which imply entry by more firms and thus increase in number of firms in cluster.
3. Negatively related: As t cost of job switching increases, the expected utility falls from the isolated job.
4. Negative relationship: this is because as t number of workers in a cluster increase the average skill mismatch would reduce. There will be as of finding people with skills when th number of workers is high.
5. Negative Relationship: Average cost = Total cost of training/number of workers . A number of workers increase the cost of training reduces.
6. Positive Relationship: As the number of Firms increase the cluster will get congested, Thus increasing commutation cost pr km in cluster.