Which of the following would typically be considered a downside to geographical clustering?
A) Firms may have to lower prices on their products because there are many local competitors serving the same market.
B) Firms have to spend more on transportation costs for their inputs because suppliers are located far away.
C) Firms in a region have lower net income because the tax rate in that region is very high.
D) Firms may benefit by improvements in local infrastructure such as roads and utilities.

Question

Quizplus · Accepted Answer

Geographical clustering can lead to increased competition and a saturation of the market, which often results in firms needing to lower prices to remain competitive. This can negatively impact profits and revenue for firms.

Which of the Following Would Typically Be Considered a Downside