Suppose Technological Improvements Reduced the Cost of Producing Automobiles by 50

question 13

Multiple Choice

Suppose technological improvements reduced the cost of producing automobiles by 50 percent, causing the price of automobiles to decline by a similar amount. Which of the following would necessarily result from this development?

• A) Employment in the automobile industry would decrease.
• B) Real income would increase.
• C) Real income would decrease.
• D) Both a and c are correct.

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Definitions:

Product Development

The process of creating new products or enhancing existing ones, from concept through design, testing, and launching to the market.

Market Development

The process of expanding into new markets to increase sales and profitability, often by identifying and entering new geographic or demographic segments.

Market Penetration

The extent to which a product or service is recognized and bought by customers in a particular market.

Diversification

A strategy of investing in a variety of assets to reduce exposure to any single investment's risk.