Final answer:
There are efficiency gains from digitization of equipment. This can often lead to firms choosing production technologies that favor machinery over labor as machine costs decrease, whereas they may opt for labor-intensive technologies if machine costs increase. Being aware of potential effects like the Jevons paradox is also essential.
Step-by-step explanation:
There are efficiency gains from digitization of all sorts of equipment, which is the correct answer for the multiple-choice question. The process of converting information into a digital format (in which the information is organized into bits) can significantly improve the efficiency of various operational processes. When considering production technology, it is vital to choose the option with the lowest total cost. Digitization may introduce instances where companies shift towards using more technology and machinery in place of labor, especially if machine hours become cheaper, leading to a more automated environment. This strategy aligns with the notion that firms should adapt to technological advancements to optimize costs and resources.
Moreover, the implementation of digital systems often results in more precise control, better quality, faster processing, and, sometimes, reduced costs in many sectors, from manufacturing to services. For example, with the advancement of technology, the firm may opt for a technology that requires less labor and more machines when the cost of machinery goes down.
In contrast, when the cost of machines increases, firms may have to consider production technologies that lean more towards labor instead of capital investment. It's also important to acknowledge the potential repercussions of efficiency improvements, such as the Jevons paradox, where increased efficiency can lead to increased consumption of the resource due to lowered operational costs.