Which of the following is NOT a benefit of agglomeration?

• A. Higher levels of pollution and congestion
• B. Access to a larger pool of specialized labor
• C. Lower transportation costs due to proximity of suppliers and customers
• D. Increased sharing of knowledge and innovation among firms

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of agglomeration in microeconomics. Agglomeration refers to the benefits that firms and individuals gain by locating close to each other, often in cities or industrial clusters.
2. Step 2: Identify common benefits of agglomeration, which typically include access to a larger pool of specialized labor, lower transportation costs due to proximity of suppliers and customers, and increased sharing of knowledge and innovation among firms.
3. Step 3: Recognize that while agglomeration has many benefits, it can also lead to negative externalities such as higher levels of pollution and congestion, which are not considered benefits but rather costs or drawbacks.
4. Step 4: Compare each option given in the problem to the known benefits and drawbacks of agglomeration. The options that describe positive effects (specialized labor, lower transportation costs, knowledge sharing) are benefits.
5. Step 5: Conclude that the option describing higher levels of pollution and congestion is NOT a benefit of agglomeration, but rather a negative consequence.