Information technology: a new era?
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# Questions for review and discussion

## Question 9

Suppose a firm uses 200 hours of labour per day and produces 4000 mobile phones. It then reduces its labour inputs to 100 hours per day and finds it can produce 3000 phones. Which one of the following is a correct statement about the change in the firm's productivity?

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A | ✓ | The firm now produces 25% fewer phones, so its productivity has fallen by 25%.
B | ✓ | The firm has cut its labour hours by 100 but its output has fallen by 1000, so its productivity has fallen.
C | ✓ | The firm employs 50% of the labour hours it employed before and produces 75% of its previous output, so its productivity has risen by 25%.
D | ✓ | The firm has increased its output per labour hour from 20 units to 30 units, so its productivity has risen by 50%.

## Answer

D

## Question 10

Some of the following features of industrial revolutions belong to a microeconomic perspective (as opposed to a macroeconomic perspective). Select the ones you think belong (there is more than one correct statement).

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A | ✓ | There will be a rise in the level of productivity across the economy.
B | ✓ | There is rapid entry into and exit from a new industry in its growth phase.
C | ✓ | You will see cumulative technological change resulting from the birth of new general purpose technologies.
D | ✓ | There is an increase in the level of income per head.
E | ✓ | There will be a sustained fall in the price of a new product once a product standard has emerged.

## Answer

B and E

## Question 11

Which one of the following characteristics is most typical of an industry in its growth phase?

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A | ✓ | There will be rapid entry of new firms, each producing a different version of the product.
B | ✓ | There will be firms of many kinds producing in a pre-commercial way.
C | ✓ | The emergence of a standardised product will be followed by the exit of firms unable to produce it efficiently.

## Answer

C

## Question 12

The table below is designed to give information about the price of a product in two years, 2000 and 2005. What are the correct values to put into the spaces in the table.

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Year | Actual price of product (£ per unit) | Price index (base year 2000)
--- | --- | ---
2000 |  |
2005 | £30 | 75

## Answer

£40 and 100

## Question 13

Explain briefly using examples:

1. how productivity may increase with the introduction of new technology;

2. how the characteristics of a general purpose technology help us to understand industrial revolutions;

3. how technological progress may increase economic growth.

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