Carla H is considering buying a few tablet devices for her bakery so customers can place orders for her signature cupcakes on their own, straight from the counter.

Reason: She fears the $7.25 an hour that she currently pays her 10 customer service employees, could rise, perhaps to $9 an hour under a pledge by President Obama earlier this month.

Key Facts from Article

1. Ms. H believes that the customer-ordering process has to be automated, in order to remain profitable with self-serving tablets

2. The combined cost of two tablets, plus a customized application for displaying products with descriptions and processing orders range from $5,000 - $15,000 to implement

3. Some businesses see a promise in selling technologies to small businesses to help do away with low-wage workers

   1. A $22,000 six-foot-tall robot with flexible arms, a face screen, and rolling pedestals replaces the low-wage workers at small manufacturing firms that can’t afford traditionally automated robots that require someone to program it

 

1. Now, consider our cost minimization model of Ch 9. In this case, assume that the two inputs are labor (X axis) and robots (Y axis). Draw a graph of an initial cost minimizing position which depicts the cost-minimizing amounts of labor and robots capable of producing the desired output, Q. 

   1. Label your axes, and intercepts clearly (assume that r =Price of a robot, w = price of Labor, and C is total cost, R=quantity of Robots, and L =quantity of Labor). Draw on the same graph what would happen if the wage rose (say, due to the increase in the minimum wage). 

   2. Describes what happens in the graph. Is the firm still able to produce the same desired output? Explain.