Question

Which of the following are examples of a firm experiencing positive technological change? a. A fall in the wages JetBlue pays its mechanics leads it to lower its ticket prices. b. A training program makes a firm's workers more productive. c. An exercise program makes a firm's workers healthier and reduces the number of days the typical worker is absent. d. A firm cuts its workforce and is able to maintain its initial level of output. e. A firm rearranges the layout of its factory and finds that by using its initial set of inputs, it can produce exactly as much as before.

Short answer

The examples of a firm experiencing positive technological change are b) A training program makes a firm's workers more productive, c) An exercise program makes a firm's workers healthier and reduces the number of days the typical worker is absent, and d) A firm cuts its workforce and is able to maintain its initial level of output.

Step-by-step solution

Analyze each variation

This step involves carefully reading each scenario and determining whether it involves a change in the level of output produced by the firm or if the firm is able to increase its production with the same level of inputs.

Identify Positive Technological Changes

Positive technological change represents scenarios where this change causes the firm to improve its ability to produce more output with the same level of input. It is pertinent to identify these scenarios from the given options.

Confirm the Positive Technological Changes

In this final step, you confirm the scenarios that were identified as showcasing positive technological change in step 2. You need to ensure that these scenarios meet the definition of positive technological change i.e., an improvement in the firm's ability to produce more output using the same level of inputs.

Key concepts

Productivity Improvement

Productivity improvement is all about enhancing the efficiency and output of a firm's production process. This can happen through various means, such as adopting new technologies, improving worker skills, or streamlining processes. When workers are trained better, like in a training program, they become more efficient. They can produce more in the same amount of time, which directly leads to productivity improvement. For instance, if a firm's workers become more productive through training, they will be able to produce more goods or services within the same work hours without the need for additional resources.

Productivity improvements are crucial for a firm as they can lead to increased competitiveness, lower costs, and higher profits. Firms that consistently improve productivity can offer better prices, innovate faster, and capture more market share. This is essential in industries where technological change is rapid and where staying ahead in productivity is key to maintaining firm efficiency.

Firm Efficiency

Firm efficiency measures how well a firm uses its resources to produce output. Efficient firms get more output from the same set of inputs, like labor and raw materials, compared to less efficient firms. In the context of the given exercise, if a firm can cut its workforce yet maintain the same level of output, it indicates an improvement in firm efficiency.

• Efficiency can be improved through various means:
• Implementing better production techniques.
• Utilizing advanced technology.
• Rearranging the work environment to minimize waste.

Greater efficiency usually translates into cost savings. These savings can then be invested back into the firm, used to lower product prices, or added to profits. In a highly competitive market, maintaining firm efficiency is critical for a firm's survival and success.

Input-Output Analysis

Input-output analysis is a technique used to understand the relationship between inputs (like labor, raw materials, and capital) and outputs (goods or services produced) in a firm. This analysis helps firms to see how efficiently they use resources and identify areas for improvement.

For example, if a firm rearranges its factory layout and can produce the same amount of goods with the same inputs, they can achieve a better understanding of their input-output relationship. Even if output remains unchanged, the firm might now have a clearer path to optimize further.

By analyzing how each input contributes to the output, firms can pinpoint inefficiencies and decide where to allocate resources more effectively. This kind of analysis is essential for making informed decisions that contribute to technological change and can result in improved productivity and firm efficiency. It drives strategic planning and helps in setting achievable and impactful goals.