The productivity changes resulting from research and development would be best represented by:
A) an upward shift of a firm's production function.
B) a downward shift of a firm's production function.
C) the firm's isoquants shifting away from the origin.
D) a movement to the northeast along the firm's production function.

Question

Quizplus · Accepted Answer

An upward shift of a firm's production function indicates that the firm can produce more output with the same level of inputs, which is exactly what happens when productivity increases due to research and development. This is because R&D leads to the discovery and implementation of new and improved processes, techniques, and technologies, which enhance the efficiency and effectiveness of resource utilization. Therefore, an upward shift of the production function reflects the positive impact of R&D on the firm's overall productivity.

The Productivity Changes Resulting from Research and Development Would Be