Question

19. Which of the following is the best explanation for self-agglomeration? A. Network effects in the city economy mean that expanding industries are attracted to the city. The associated job opportunities attract workers to the city. This means that city house prices rise, and this reduces the incentive for additional people to move from the countryside. At the same time, the per capita productivity of the rural land base rises as people leave for the city, and this boosts the incomes of people living in the countryside. These two mechanisms together mean the city and rural populations are self-stabilizing. B. Network effects mean that when one firm in the city shuts down in response to trade liberalization, it reduces the productivity of all remaining firms. This means that city wages fall and the city becomes less attractive to workers. Many workers then leave the city and this means that the provision of public amenities and infrastructure declines because the per capita cost of provision rises. This in turn makes the city less productive for firms and less attractive to workers as a place to live, and the city descends into a self-reinforcing decline. Network effects in the city economy mean that industry is attracted to the city. The associated job opportunities attract workers to the city. This means that more public amenities and infrastructure can be built in the city because the per capita cost of provision falls. This boosts the productivity of industry, and the associated boost in job opportunities attracts even more people to the city. D. An ancient ritual whereby people punish themselves for the sins of their ancestors.