Organizations that produce similar goods tend to concentrate in the sa

Question

Organizations that produce similar goods tend to concentrate in the same geographic area (geographic concentration of production). Economic explanations of such industrial agglomeration explicitly emphasize better performance, and implicitly emphasize lower failure rates, as the key processes contributing to this geographic concentration. Sometimes industries benefit economically from situating themselves in particular locations that offer intrinsic advantages such as access to scarce raw materials or proximity to consumers. In other cases, regardless of the particular location, the colocation of structurally equivalent organizations—those that operate in the same markets—may itself yield advantages such as common labor markets and knowledge spillovers.

Sorenson and Audia point out that these explanations ignore the fact that structurally equivalent organizations also compete with one another for vital resources, and colocation would be expected to increase such competition. Organizational ecology studies support this expectation by showing that organizations apparently compete more intensely within local population boundaries.

Sorenson and Audia propose instead that what maintains geographic concentration is entrepreneurial opportunity, which leads to higher founding rates. Dense local concentrations of structurally equivalent organizations increase the pool of potential entrepreneurs in a region. Beginning entrepreneurs need exposure to existing organizations in the industry to acquire knowledge of the business, ties to scarce resources, and self-confidence. The existing geographic concentration of production constrains access to these resources, so that new foundings tend to reinforce geographic concentration.

1. It can be inferred from the passage that Sorenson and Audia’s argument differs in part from the economic explanations mentioned in the highlighted text in that Sorenson and Audia claim that

A. lower failure rates in an industry are not necessarily a result of better performance
B. geographic concentration of production is a result of higher founding rates
C. access to scarce resources is less important for the success of a new organization than is proximity to consumers
D. structurally equivalent organizations compete with one another for consumers in the same markets
E. certain geographical regions offer intrinsic advantages that can benefit a particular industry economically

2. The author of the passage mentions common labor markets in the highlighted text most probably in order to

A. point out one area in which structurally equivalent organizations must compete for resources
B. elaborate a contrast between industries that exhibit geographic concentration of production and those that do not
C. undermine the argument that industries benefit economically from situating themselves in particular locations
D. highlight an advantage that can be shared by structurally equivalent organizations that are not situated near each other
E. provide an example of an advantage of geographic concentration that is not intrinsic to a particular location

3. The primary purpose of the passage is to

A. suggest a possible explanation for a phenomenon and provide evidence in support of that explanation
B. present certain explanations for a phenomenon and introduce an alternative explanation
C. outline an explanation for a phenomenon and defend that explanation against objections that have been raised against it
D. chronicle the history of a scholarly debate regarding a particular economic phenomenon
E. illustrate how economic theorists’ views about a particular phenomenon have changed

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Show Answer Question #1

Official Answer

B

Show Answer Question #2

Official Answer

E

Show Answer Question #3

Official Answer

B

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sofiwerner1 · Answer

in Q1 why is answer D wrong? Authors also mention that same thing in the middle paragraph (I understand why B is wright but I had a hard time evaluating which was the better answer choice)

Dhruvdaddy1 · Answer

The passage never mentions the consumer market.

Mohak01 · Answer

Can someone post official explanation for Q1.

kabirgandhi · Answer

Answer D: is incorrect because the passage implies that colocated organisations compete with each other for customers, as mentioned in P1: "proximity to customers" being one of the intrinsic advantages. However, we do not hear competition for the same customers from Sorenson and Audia. The question asks that these two views (general economic views vs Sorenson and Audia) differ in ways in that  Sorenson and Audia:

This means we have to find something that is not believed by the general economic views, but believed by Sorenson and Audia. The only answer choice other than D) that seems to be tempting is B) which mentions founding rates being the primary factor - which is the correct answer.

Dream009 · Answer

Bunuel Or bb - Can someone help explain this - I get what B says but read this line too: Sorenson and Audia point out that these explanations ignore the fact that structurally equivalent organizations also compete with one another for vital resources, and colocation would be expected to increase such competition.

So how to reject D

So how to reject D

Sajjad1994 · Answer

Hi

Do you referring to question #1? i guess.

WiziusCareers1 · Answer

This passage explores why similar companies tend to cluster together (industrial agglomeration). It compares traditional economic explanations (which focus on efficiency and lower failure rates) with Sorenson and Audia’s perspective (which focuses on how clusters create more new businesses, despite higher competition).

Question 1 
 (A) Incorrect.  While Sorenson and Audia argue that clusters might actually increase competition (potentially increasing failure rates),  they do not spend time redefining the relationship between performance and failure rates.  They are more focused on the source of the concentration.
 (B) Correct.    The third paragraph  explicitly states that Sorenson and Audia "propose instead that what maintains geographic concentration is entrepreneurial opportunity, which leads to higher founding rates." This directly contrasts with the economic explanation mentioned in the first paragraph, which attributes concentration to performance and lower failure rates.
 (C) Incorrect.  The passage actually states that  "ties to scarce resources" are part of what a new entrepreneur needs.   It does not rank the importance of resources versus consumers.
 (D) Incorrect.  Both the economic explanations and Sorenson/Audia would likely agree that  similar companies compete.  The difference is that  Sorenson/Audia emphasize this competition as a negative  of colocation that the economic model ignores.
 (E) Incorrect.   This choice describes the "intrinsic advantages" mentioned in the first paragraph as part of the economic explanation.  Sorenson and Audia's argument is an alternative to this view.

Question 2 
 (A) Incorrect.  While labor is a resource, the  first paragraph mentions it as a "yielded advantage" (a benefit) of colocation, not as a point of competition.  Competition is introduced later by Sorenson and Audia.
 (B) Incorrect.  The passage is focused on explaining why concentration happens,  not on drawing a contrast between concentrated and non-concentrated industries. 
 (C) Incorrect.  The author is  not trying to "undermine" the idea of intrinsic advantages  (like raw materials). Instead, the author is showing that besides those intrinsic factors, the act of colocation "itself" yields other benefits.
 (D) Incorrect.  The text  explicitly says these advantages come from "colocation,"  which means being situated near each other.
 (E) Correct.  The first paragraph distinguishes between two types of advantages: (1) Intrinsic advantages (like access to raw materials) and (2) Colocation advantages (benefits that arise just from being near each other, regardless of the spot). "Common labor markets" is used as an example of the latter.

Question 3 
 (A) Incorrect.  While the author provides "Organizational ecology studies" to support the idea that competition increases in clusters, the  main thrust of the passage is to present Sorenson and Audia’s alternative theory (founding rates), not just to prove one single explanation. 
 (B) Correct.  The passage starts by presenting the standard economic explanations for geographic concentration (performance/failure rates). It then introduces Sorenson and Audia’s critique (that those explanations ignore competition) and their alternative explanation (high founding rates/entrepreneurial opportunity).
 (C) Incorrect.  The author  does not "defend" the economic explanation  against objections; rather, the author uses Sorenson and Audia’s work to challenge the completeness of those economic explanations.
 (D) Incorrect.  A "chronicle" would imply a timeline of how the debate evolved over many years.  This passage is a snapshot of two differing viewpoints rather than a historical timeline. 
 (E) Incorrect.   The passage  doesn't focus on how views changed over time ; it presents a contemporary academic disagreement between two different schools of thought (economics vs. Sorenson/Audia/Organizational Ecology).

Organizations that produce similar goods tend to concentrate in the sa

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Organizations that produce similar goods tend to concentrate in the sa

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