Automation, broadly referring to the adoption of machines and computers in the production process has become increasingly
Question:
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)
Source: Modified from Exhibit 2 , McKinsey & Company, Industrial Robotics: Insights into the Sector's Future Growth Dynamics, July 2019.
Note: Forecast 2018-2021
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)
Source: Tilley, Jonathan, "Automation, Robotics, and the Factory of the Future", September 7, 2017, McKinsey & Company.
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.
Draw the production function of Bruno's firm. The diagram should have the number of workers on the horizontal axis and the number of windscreens on the vertical axis. Illustrate the effect of Bruno's decision to use more robots on his production function. Briefly explain the diagram drawn as well.
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