D Refer to Figure 1 above. In class, we assumed that firm revenue was constant over N and solved for the profit-maximizing number of firms. I suggest you draw the graph we drew in class before you answer this question. Assuming nothing else is changing, how would the profit-maximizing number of firms change if firm revenue was decreasing in N? It would stay the same O it would decrease it would increase Question 4 Refer to Figure 1 above. Now consider a different change in the profit-maximization problem you just did in the previous question. You can assume that revenue is constant or decreasing in N to answer the question, as long as you hold that assumption constant as you evaluate this new change. Assuming nothing else is changing, how would the profit-maximizing number of firms change if Curve 1 in 1 Figure 1 shifted down (.e. to the right), but the slope stayed the same. It would stay the same It would increase It would decrease

ENGR.ECONOMIC ANALYSIS
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### Explanation of Industrial Clusters: 

In our recent class, we discussed the concept of clothing makers concentrating (clustering) around a button maker. Below is a graph (Figure 1) that helps illustrate this concept. 

#### Figure 1: Graph Details

- **Axes**: The graph uses two axes. The vertical axis is labeled **S**, and the horizontal axis is labeled **N**.
- **Curves**: The graph contains two curves:
  - **Curve 1**: This curve has a positive slope, meaning it rises from left to right.
  - **Curve 2**: This curve has a negative slope, meaning it falls from left to right.

The intersection of Curve 1 and Curve 2 represents an equilibrium point in the context of our discussion on industrial clusters, where "N" signifies the number of firms in the cluster. 

#### Important Considerations
Understanding the dynamics of these curves can help explain how clusters of clothing makers develop around a central button maker, influenced by factors such as resource availability, labor supply, and economic incentives.

**Use this information to answer the questions that follow below:**

- How might the concentration of firms (N) affect the supply (S) in the cluster?
- What factors could lead to a rightward or leftward shift in these curves? 

These questions are designed to deepen your understanding of industrial clustering and the economic principles that underpin such phenomena.
Transcribed Image Text:### Explanation of Industrial Clusters: In our recent class, we discussed the concept of clothing makers concentrating (clustering) around a button maker. Below is a graph (Figure 1) that helps illustrate this concept. #### Figure 1: Graph Details - **Axes**: The graph uses two axes. The vertical axis is labeled **S**, and the horizontal axis is labeled **N**. - **Curves**: The graph contains two curves: - **Curve 1**: This curve has a positive slope, meaning it rises from left to right. - **Curve 2**: This curve has a negative slope, meaning it falls from left to right. The intersection of Curve 1 and Curve 2 represents an equilibrium point in the context of our discussion on industrial clusters, where "N" signifies the number of firms in the cluster. #### Important Considerations Understanding the dynamics of these curves can help explain how clusters of clothing makers develop around a central button maker, influenced by factors such as resource availability, labor supply, and economic incentives. **Use this information to answer the questions that follow below:** - How might the concentration of firms (N) affect the supply (S) in the cluster? - What factors could lead to a rightward or leftward shift in these curves? These questions are designed to deepen your understanding of industrial clustering and the economic principles that underpin such phenomena.
---

### Question 3

**Refer to Figure 1 above.**

In class, we assumed that firm revenue was constant over N and solved for the profit-maximizing number of firms. I suggest you draw the graph we drew in class before you answer this question.

Assuming nothing else is changing, how would the profit-maximizing number of firms change if firm revenue was decreasing in N?

- It would stay the same
- It would decrease
- It would increase

---

### Question 4

**Refer to Figure 1 above.**

Now consider a different change in the profit-maximization problem you just did in the previous question. You can assume that revenue is constant or decreasing in N to answer the question, as long as you hold that assumption constant as you evaluate this new change.

Assuming nothing else is changing, how would the profit-maximizing number of firms change if Curve 1 in Figure 1 shifted down (i.e. to the right), but the slope stayed the same?

- It would stay the same
- It would increase
- It would decrease

---

Note: The reference to Figure 1 indicates there is a graph that illustrates the relationship between firm revenue and the number of firms (N). However, Figure 1 is not included in the provided text. The graph likely shows revenue on the vertical axis and the number of firms (N) on the horizontal axis.
Transcribed Image Text:--- ### Question 3 **Refer to Figure 1 above.** In class, we assumed that firm revenue was constant over N and solved for the profit-maximizing number of firms. I suggest you draw the graph we drew in class before you answer this question. Assuming nothing else is changing, how would the profit-maximizing number of firms change if firm revenue was decreasing in N? - It would stay the same - It would decrease - It would increase --- ### Question 4 **Refer to Figure 1 above.** Now consider a different change in the profit-maximization problem you just did in the previous question. You can assume that revenue is constant or decreasing in N to answer the question, as long as you hold that assumption constant as you evaluate this new change. Assuming nothing else is changing, how would the profit-maximizing number of firms change if Curve 1 in Figure 1 shifted down (i.e. to the right), but the slope stayed the same? - It would stay the same - It would increase - It would decrease --- Note: The reference to Figure 1 indicates there is a graph that illustrates the relationship between firm revenue and the number of firms (N). However, Figure 1 is not included in the provided text. The graph likely shows revenue on the vertical axis and the number of firms (N) on the horizontal axis.
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