Technological improvements cause

Question

Quizplus · Accepted Answer

Technological improvements allow existing firms to produce more output with the same amount of resources or production inputs. Generally, firms are incentivized to increase production to take advantage of the cost savings from the technology, to stay competitive in the market or to increase their market share. Therefore, existing firms are likely to produce more output as a result of technological improvements. Option A is incorrect because new firms are likely to enter the market if technological improvements make it easier or cheaper to produce the good or service, or if there is a higher demand for the improved product. Option B is incorrect because while some firms may exit the market, it is unlikely that the remaining firms will produce more output since the technology will mainly improve productivity, not necessarily increase demand for the good or service they produce.

Technological Improvements Cause