Explain how firms\' production functions and cost curves will change as science

Question

Explain how firms' production functions and cost curves will change as science and technology advance and as the knowledge of how to organize and manage resources improves. Explain how firms' production functions and cost curves will change as science and technology advance and as the knowledge of how to organize and manage resources improves. Explain how firms' production functions and cost curves will change as science and technology advance and as the knowledge of how to organize and manage resources improves.

Explanation / Answer

The production function will yield increasing returns as and when there is an improvement in science and technology. The technological advancement will result in higher production with same amount of capital. The advancement of technology will also bring down the costs incurred by the firms. Advanced technique of production will increase the output per unit of factor input. The average costs will come down and improve the profitability in the long run. The technical know-how will help in division of labor on the basis of work assigned which in turn will improve the efficiency of the labor and again improve the profitability in the long run.

Though the firms who enjoy the economies of scale only are able to capitalize on these benefits, because in the short run the firms are not able to afford huge costs related to advanced technology and also the process is not so refined that the division of labor can help.

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