Final answer:
Metro areas with large agglomeration economies attract firms due to the advantages of having a large market and a diverse labor force, leading cities to expand.
Step-by-step explanation:
Metro areas that have the largest agglomeration economies in production are where firms tend to cluster, thereby making cities larger.
This isn't exactly the same as economies of scale within a single firm's production function, but rather it's related to the increasing size of the overall population and market in an area.
Agglomeration economies occur because cities provide a large customer base that allows businesses to produce efficiently, as well as a deep labor pool and network of suppliers. Furthermore, cities offer a variety of services and products that are appealing to consumers.
However, these economies can transform into diseconomies when the negative effects of high-density living, such as traffic congestion, pollution, and increased crime, begin to undermine the advantages.
This explains why not everyone lives in a single massive city and suggests a natural limit to urban growth.