Why are many improvements in productivity often attributed to improved technology?

• A. Because technology enables firms to produce more output with the same amount of inputs.
• B. Because technology eliminates the law of diminishing returns.
• C. Because technology always increases the price of goods and services.
• D. Because technology reduces the need for specialization in production.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of productivity in microeconomics, which measures the amount of output produced per unit of input.
2. Step 2: Recognize that technology refers to the methods, processes, and knowledge used to produce goods and services.
3. Step 3: Analyze how improvements in technology can affect production by enabling firms to produce more output using the same quantity of inputs, effectively increasing productivity.
4. Step 4: Recall that the law of diminishing returns states that adding more of one input, while holding others constant, eventually leads to smaller increases in output; technology does not eliminate this law but can shift the production function upward.
5. Step 5: Conclude that the main reason many productivity improvements are attributed to technology is because it allows firms to produce more output with the same inputs, rather than affecting prices or specialization directly.