Author Question: Assume Ford Motor company purchases a robot that can do the welding work of ten union workers. If ... (Read 85 times)

elizabeth18 · **on:** Jun 29, 2018

Assume Ford Motor company purchases a robot that can do the welding work of ten union workers. If the robot is a perfect substitute for labor what can we be sure is true about the annual cost of using and maintaining one robot?

What will be an ideal response?

Question 2

Critically evaluate the following statement. Short-run costs curves must be downward-sloping because after all labor is increasingly more productive.

What will be an ideal response?

katheyjon · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The annual cost would have to be less than ten times the annual salary and benefits of one union worker. If it were any more expensive than that it would make more sense to keep the union workers and get rid of the robot.

Answer to Question 2

If indeed labor were increasingly more productive this would indeed be true. However, in most productive processes the law of diminishing marginal productivity sets in eventually and leads to a U-shaped short-run average cost function.