Switzerland has over 500 watch manufacturers. Most of them are quite small and they cluster around the so-called "Watch Valley" which is an area covering the Jura Mountains from Geneva to Basel. Swiss watches dominate the world's fine watch market. a) Explain how geographic clustering of the Swiss watch industry helps to create external economies of scale. b) It is quite possible that some other country has a lower average cost curve for watch production (e.g. due to lower wages). Yet Switzerland continues to be the world's largest producer and exporter of fine watches. Explain why external EOS have a tendency to cause established pattern of production and trade to be "locked in."
Switzerland has over 500 watch manufacturers. Most of them are quite small and they cluster around the so-called "Watch Valley" which is an area covering the Jura Mountains from Geneva to Basel. Swiss watches dominate the world's fine watch market. a) Explain how geographic clustering of the Swiss watch industry helps to create external economies of scale. b) It is quite possible that some other country has a lower average cost curve for watch production (e.g. due to lower wages). Yet Switzerland continues to be the world's largest producer and exporter of fine watches. Explain why external EOS have a tendency to cause established pattern of production and trade to be "locked in."
Chapter9: Monopoly
Section: Chapter Questions
Problem 12SQP
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