As Industry Output Increases, Suppose That New Knowledge About Production

question 125

Multiple Choice

As industry output increases, suppose that new knowledge about production technology spreads among firms in the area through direct contacts among firms or as workers transfer from firm to firm.Which concept does this example demonstrate?

• A) internal economies of scale
• B) external economies of scale
• C) the home market effect
• D) specialization in production

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Definitions:

Contrast Effect

An effect that takes place when people rank something higher or lower than they should as a result of exposure to recent events or situations.

Perceptual Distortion

An error in perception resulting from individual biases or misinformation, affecting the interpretation of reality.

Attribution Theory

A theory that holds that people look for two causes to explain the behavior of others: internal attributions, which are personal characteristics of others, and external attributions, which are situational factors.

Behavior

The actions, reactions, and functioning of an individual or group in response to external and internal stimuli, observed in various contexts.