or more than 20,000 would face higher average costs and be unable to compete.

CLEAR IT UP

How can we view cities as examples of economies of scale?
Why are people and economic activity concentrated in cities, rather than distributed evenly across a country? The

fundamental reason must be related to the idea of economies of scale—that grouping economic activity is more

productive in many cases than spreading it out. For example, cities provide a large group of nearby customers, so

that businesses can produce at an efficient economy of scale. They also provide a large group of workers and

suppliers, so that business can hire easily and purchase whatever specialized inputs they need. Many of the

attractions of cities, like sports stadiums and museums, can operate only if they can draw on a large nearby

population base. Cities are big enough to offer a wide variety of products, which is what appeals to many shoppers.
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