Technological advances.
Answer to Problem 1DQ
- a. Yes
- b. No
- c. Yes
- d. No
Explanation of Solution
Technological advances can be broadly defined as any changes in the technology used in the production which leads to the development of new goods and services in the economy. The quality of the new products will be higher than the existing goods and services. The technological advances can be the development of new machinery or a new method or combination to produce the goods and services more efficiently.
The long run is a period of time which is sufficiently large to bring changes in all the factors of production of a firm. Thus, a very long run can be defined as the period in which everything related to the firm and its products can be changed. Technology will be constant in the long run but not in the very long run. In the very long run, even the technology can be changed and the advancements in the technology can lead to the introduction of new products by the firm, or more efficient production and distribution of the existing products by the firm.
Option (a):
The improvement in the production process can make the production procedure more efficient than the current situation by reducing time and effort. Thus, the innovation and the improvements in the production process are examples of technological advances.
Option (b):
The entry of the new firm into the competitive industry cannot be considered as technological advancement because it only increases the competition in the economy and it has nothing to do with the technological changes. The profit present in the market attracts new entrants; not technological advances. Thus, option ‘b’ is not an example for technological advances.
Option (c):
Technological advances can be brought by any firm in the market. When the technological advances are very noticeable and efficient, other firms will take up the advances by imitating them. It will help them to improve their production process. This process is known as diffusion. Thus, option ‘c’ is an example for technological advances.
Option (d):
Advertisement costs are the non-price factors in which oligopolists will compete with each others. The increased advertisement expenditure helps the firm to capture consumer preferences and seal the market share. Thus, option ‘d’ cannot be considered as an example of technological advances.
Concept introduction:
Technological advances: They are the changes leading to new and better ways of producing and distributing, which will make production more efficient.
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Chapter 15 Solutions
Economics (Irwin Economics)
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