Question

Which one of the following actions is guaranteed to result in lower labor costs?

1) Increasing the minimum wage
2) Implementing automation
3) Hiring more employees
4) Outsourcing labor to another country

Answer 1

Implementing automation leads to reduced labor costs as it allows a firm to utilize machines more and human labor less, therefore decreasing the hours paid to workers.

Step-by-step explanation:

The action that is guaranteed to result in lower labor costs out of the options provided is implementing automation. When a firm decides to invest in automation, it shifts production technology towards more machines and less human labor. This process often leads to a reduction in the hours paid to workers, as automated systems can perform tasks previously handled by human employees. For instance, if a company has to choose between varying production technologies, it would be beneficial to select the one with the lowest total cost, which often favors more machines due to cheaper machine hours. Consequently, this leads to reduced labor costs as fewer employees are needed, and the ones that remain are typically more skilled and efficient.