Which of the following is an example of creative destruction?

• A. A government bailout saving a failing automobile manufacturer
• B. The rise of digital cameras leading to the decline of film photography companies
• C. A monopoly maintaining its market dominance by preventing new entrants
• D. A company increasing its production efficiency without changing its product

Answer: (B)

Verified step by step guidance

1. Understand the concept of creative destruction: it refers to the process where new innovations or technologies replace outdated ones, leading to the decline or disappearance of old industries or products.
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. Option 1 (government bailout) involves saving an existing company, which prevents destruction rather than causing it, so it is not creative destruction.
4. Option 2 (rise of digital cameras leading to the decline of film photography companies) clearly shows a new technology replacing an old one, fitting the definition of creative destruction.
5. Options 3 and 4 involve maintaining market dominance or improving efficiency without replacing the existing product or industry, so they do not represent creative destruction.