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2. Trade-offs with Clustering for Lab our Pooling. Consider the model of labor pooling, with each firm locating either in an isolated site or in
2. Trade-offs with Clustering for Lab our Pooling. Consider the model of labor pooling, with each firm locating either in an isolated site or in a cluster with other firms. Suppose that good times (high demand) and bad times (low demand) are equally likely. The table shows wages and workforces in different times and locations. Isolated Cluster Wage Workforce Wage Workforce Good times (high demand) $40 50 $30 60 Bad times (low demand) $20 50 $30 40 (a) Use a figure like Figure 3-3 to illustrate the situation. (b) During good times, the benefit of being in the cluster as opposed to being isolated is -, computed as... (c) During bad times, the cost of being in the cluster as opposed to being isolated is , computed as... (d) The benefit exceeds the cost because a firm in a cluster
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