21 Please read an article about productivity online at httpc

21. Please read an article about \"productivity\" online at http://ccs.mit.edu/papers/ccswp202/e What is the expected long-run impact of information technology on productivity and cost?

Solution

Economists all around the world emphasize on focussing on increasing efficiency of the firms in order to make more profits. Governments of the country should invest in research and development to improve efficiency of the industrial sector. Information technology can play an important role in this area. Initially it might lead to increase in overall cost of the firm due to increase in capital cost but in the long run it will improve efficiency by reducing overall cost. The long run average total cost curve of the economy will shift leftwards due to increase in productivity of the economy and reduction in cost of the goods produced.

Thus, information technology is one of the best tools that a country has to improve overall productivity and for reduction in the average total cost of the firm and thus taking the benefits of economies of scale.