Question

A single firm’s innovations in production technology often benefit the production of other firms because these other firms learn about the new technology and can use some of the ideas in their own production. a.Is there an externality here? b.How would an economist rank the following two policies in this situation? Why?

Answer 1

Answer:

The answers are:

A) Yes

B) NO INFORMATION AVAILABLE FOR THIS PART

Explanation:

Innovation in production technologies usually cause a spillover effect. The benefits of introducing new production technologies can be found all across the nation.

The bad effect of this is that many times other companies don't even pay any type of royalties or licences for using new technologies, while benefiting from them.

For example, Henry Ford introduced the assembly line concept and the whole world benefited from this.