Final answer:
Census tracts are smaller in the city center of the Toronto CMA because of higher population density and greater economic activity associated with economies of scale. The concentration of resources in cities allows for businesses to operate more efficiently. However, diseconomies of scale can occur as cities become too congested, balancing out the benefits.
Step-by-step explanation:
For the Toronto CMA, census tracts are smaller as you get closer to the city center due to the higher population density and greater economic activity that is akin to the concept of economies of scale. Economies of scale refer to the cost advantages that businesses obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. In urban areas, there is a concentration of customers, workers, and suppliers, which allows for businesses to operate more efficiently and at larger scales.
However, as cities grow, they can also experience diseconomies of scale, such as traffic congestion, pollution, and higher crime rates, which balance the advantages of being in a densely populated area. This is why not everyone chooses to live in the most densely populated parts of a city. Census tracts, therefore, reflect varying population densities and the balance between the advantages of economic concentration and the disadvantages that come with excessive urban aggregation.