Question

Consider two firms producing smartphones. One uses a highly automated robotics process, while the other uses human workers on an assembly line and pays overtime when there is heavy production demand. a. Which firm will have higher profits in a recession?

Answer 1

In a recession, the firm that uses highly automated robotics is likely to have higher profits due to lower labor costs and increased productivity. The firm relying on human workers may struggle with higher labor costs and difficulties adjusting to lower demand.

Step-by-step explanation:

In a recession, a firm that uses a highly automated robotics process is likely to have higher profits. This is because automation reduces labor costs and increases productivity, allowing the firm to produce more smartphones at a lower cost. On the other hand, a firm that relies on human workers on an assembly line may struggle to maintain profitability in a recession due to higher labor costs and the need to pay overtime.

For example, during a recession, the demand for smartphones may decrease, leading to lower sales. The firm using automated robotics can quickly adjust production levels and reduce costs by scaling back the use of robots. In contrast, the firm relying on human workers may face challenges in reducing labor costs and adjusting production levels to match the lower demand.

Overall, the highly automated firm is better positioned to weather a recession and maintain higher profits due to its ability to minimize costs and optimize production efficiency.

Answer 2

Answer: The firm that is using human workers.

Step-by-step explanation:

A recession is simply referred to as a contraction that occurs in the business cycle when there is a reduction in the economic activities and this invariably leads to reduction in expenses by the consumers.

Since there is recession, there won't be need to pay the workers overtime as there won't be heavy production, therefore the firm that is using human workers will have higher profit in recession.