Which of the following is the best example of creative destruction?

• A. A company increasing its advertising budget to boost sales
• B. The rise of digital cameras leading to the decline of film photography companies
• C. A firm hiring more workers to meet increased demand
• D. A government bailout saving a failing automobile manufacturer

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of creative destruction. Creative destruction refers to the process where new innovations or technologies replace outdated ones, leading to the decline or disappearance of old industries and the rise of new ones.
2. Step 2: Analyze each option to see if it involves the replacement of an old technology or industry by a new one, which is the hallmark of creative destruction.
3. Step 3: The option 'A company increasing its advertising budget to boost sales' involves marketing efforts but does not replace an old technology or industry, so it is not creative destruction.
4. Step 4: The option 'A firm hiring more workers to meet increased demand' is about expanding production capacity, not about replacing old industries or technologies.
5. Step 5: The option 'The rise of digital cameras leading to the decline of film photography companies' clearly shows new technology (digital cameras) replacing an old industry (film photography), which perfectly illustrates creative destruction.