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Layer 3 addressing is hierarchical because it allows the division of networks into subnets. For example, one route entry can refer to a large general network and another can refer to a subnet of that same network. When forwarding a packet, the router will select the most specific route that it knows. However, if a specific subnet is not in the routing table but the larger network that holds the subnet is known, then the router will send it to the larger network, trusting that another router will find the subnet.

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Q: Why is layer three addressing hierarchical?
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