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Homework answers / question archive / Automation, broadly referring to the adoption of machines and computers in the production process has become increasingly more popular across many sectors and countries
Automation, broadly referring to the adoption of machines and computers in the production process has become increasingly more popular across many sectors and countries. For example, the market for industrial robots has experienced a dramatic expansion in the last couple of decades, as shown in Figure 1. Figure 1 Annual shipments of industrial robots worldwide (thousand units) 630 553 484 421 381 294 254 221 178 Source: Modified from Exhibit 2, McKinsey & Company, Industrial Robotics: Insights into the Sector's Future Growth Dynamics, July 2019. 120 113 121 97 mill Note: Forecast 2018-2021 2000 2005 2010 2015 18F 19F 20F 2021F At the same time, the prices of labour and robots have been changing. The case of the US manufacturing sector in the last few decades is shown in Figure 2. Figure 2: Robot prices and labour compensation in manufacturing in the US (1990–100) 220 Labor costs 200 180 Source: Tilley, Jonathan,"Automation, Robotics, and the Factory of the Future", September 7, 2017, McKinsey & Company. 160 140 120 100 80 60 40 Robot prices 1990 1995 2000 2005 2010 Now, consider Bruno, who owns a small manufacturing firm and produces windscreens for automobiles. Currently Bruno uses two robots and ten workers including Angela in his production. Answer the following questions based on the topics covered in the lectures from weeks 1-6.
[Question 1] Based on the information in Figure 2, illustrate in a diagram how Bruno would decide to use more robots in his firm to minimise production costs. Your diagram should have the number of workers on the horizontal axis and the number of robots on the vertical axis. It is not necessary to use specific numbers. [5 marks]
By using iso-quant curves and iso-cost curves we can depicts how Bruno use more robots(capital) and less labourers to minimise production cost. through isoquant, combinations 0f both inputs yield him the same level of output.He wanted to minimise production cost through automation.
By representing iso-cost line, he can purchase various combinations of two inputs with his given amount of money.The tangential point of isoquants and iso-cost line provide the least cost combination and optimum factor combination.If he wants to reduce the cost of labour the cost of capital will increase In the diagram AB, XY, CD are the iso-cost lines. As his budget is limited he may choose XY of iso- cost line. Q2 is the isoquant curve. Point E is the tangential point of isoquant and isocost curves.MRTs here showing the marginal rate of technical substitution between Robots and labours.Here he wants to decrease the amounts of labour and in turn increases the amounts of Robots, so that the same level of productivity can be maintained.
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