[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.

How Bruno would decide to use more robots in his firm to minimise production costs

BACKGROUND

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.

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]

[Question 2]  Explain in 100-130 words why the market for industrial robots have expanded in the last couple of decades as shown in Figure 1. You must refer to the information from Figure 2 and the diagram you drew in the previous question. [5 marks]

[Question 3]  Draw the production function of Bruno’s firm. Your 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 your diagram within 50 words. [5 marks]


[Question 4]  Discuss in 100-150 words how Bruno’s decision to increase the use of robots and the general trend of increasing automation could affect in the future the following:

  • Angela’s bargaining power,
  • Angela’s real wage, and
  • Bruno’s profit.

You must refer to Figure 3 in your discussion. The description of Figure 3 can be found in Unit 4 Section 12 of the prescribed textbook. [10 marks]

Figure 3: Fraction of offers rejected in the ultimatum game, according to offer size and the number of Responders

[Question 5]  Does Bruno’s decision to use more robots bring about a Pareto improvement? Discuss in 50-100 words based on your answer for Question 4. [5 marks]

[Question 6]  Does Bruno’s decision to use more robots result in a fairer outcome? Discuss in 150-200 words based on your answer for Question 4. Your discussion must use any TWO of the following ideas. [10 marks]

  • substantive judgement of fairness
  • procedural judgement of fairness
  • consequentialist approach
  • deontological approach

See the week 6 lecture Section D and the supplementary videos to assist your discussion.

[Question 7]  Angela has been working at a real wage rate of $25 per hour. Illustrate in a diagram how Bruno’s decision to use more robots could affect Angela’s future levels of

  • real wage,
  • utility,
  • free time, and
  • consumption.

Your diagram should have Angela’s daily free time on the horizontal axis and her daily consumption on the vertical axis. Briefly explain your diagram within 70 words. [5 marks]

[Question 8]  Choose one government policy measure that you think can mitigate the potential issue(s) of increasing automation you analysed in the previous questions. Discuss in 100-150 words the reason(s) behind your choice. You must cite at least one reputable source from your own research. Include the full reference at the end of your discussion, which will not count towards the word limit. Use a standard referencing system (e.g. Harvard style). [5 marks]

You may use the following resources to help find reputable sources and cite them:

 

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☐ I have read the rubric in the next page and made sure that my assignment is up to the criteria.

INDIVIDUAL ASSIGNMENT RUBRIC

CriteriaFail (F)Pass (P)Credit (Cr)Distinction (D)High Distinction (HD)
Visual Communication – Diagram Illustration (30%) Applies to Q1, Q3, Q7   Diagrams are demonstrated to effectively reflect the given scenarios via appropriate economics concepts/theories. Diagrams are fully labelled.Not attempted, significantly plagiarised, or very poor use of diagrams. Students demonstrate poor understanding of the given scenario or relevant economic concepts/theories.   Diagrams are poorly labelled.  Student ordinarily demonstrates ability to communicate with diagrams and ordinarily reflect the real-world scenario using some economic concepts/theories.   Diagrams are partially labelled.Student satisfactorily demonstrates ability to communicate with diagrams and appropriately reflect the real-world scenario using some relevant economic concepts/theories.   Diagrams are partially labelled.Student effectively demonstrates ability to communicate with diagrams and appropriately reflect the real-world scenario using some relevant economic concepts/theories.   Diagrams are fully labelled.  Student effectively demonstrates ability to communicate diagrams and appropriately and insightfully reflect the real-world scenario using all relevant economic concepts/theories.   Diagrams are fully labelled.  
Written Communication – Analysing Issues (30%) Applies to Q2, Q4   Given scenarios are analysed using relevant and appropriate economic concepts/theories. Text has formal structure with good text logic.No attempt, significantly plagiarised, or student fails to demonstrate an analysis substantiating any of made claims through economic concepts/theories. Student simply provides personal opinions with no analysis.   Text has no formal structure. Very poor text logic with frequent use of contradictions.Student ordinarily demonstrates an analysis, develop poor arguments, struggling to substantiate claims through few and/or irrelevant economic concepts/theories. Student mostly provides personal opinions and limited analysis.   Text has under-developed formal structure. Poor text logic with recurrent use of contradictionsStudent accurately demonstrates an analysis; develops fair arguments but they lack substantiation through relevant economic concepts/theories.   Text has formal structure. Satisfactory text logic with some use of contradictions.Student accurately demonstrates an analysis; skilfully develops arguments, substantiating made claims through relevant economic concepts/theories.   Text has clear and well-developed formal structure. Excellent text logic with miniscule use of contradictions.Student accurately and insightfully demonstrates an analysis; masterfully develops arguments, substantiating made claims through relevant economic concepts/theories.   Text has clear and original formal structure. Outstanding text logic with no use of contradictions.
Written Communication – Communicating Solution via Research (10%) Applies to Q8   A clear overall argument is derived based on analysis, demonstrating independent well-reasoned judgement.   Relevant and reputable sources are used and properly cited/referenced.No attempt, significantly plagiarised, or solution is fundamentally flawed and/or contains excessive detail without argument.   Irrelevant and non-reputable sources. Referencing is non-conforming to standard style and/or absent.  Solution is basically sound with some judgement but not based on analysis.   Irrelevant or non-reputable sources. Referencing is mainly inaccurate and/or does not conform to a standard style.  Solution is sound with appropriate judgement based on analysis.   Relevant or reputable sources. Referencing is fairly accurate using standard style.  Solution is very sound with comprehensive judgement based on analysis.   Relevant and reputable sources. Referencing is accurate using standard style.  Solution is excellent, with evidence of originality and comprehensive judgement based on analysis.   Relevant and reputable sources. Referencing is accurate using standard style.  
Ethical Thinking (30%) Applies to Q5 and Q6   Demonstrate an ability to use ethical frameworks to evaluate economic outcomes in real-world applications.No attempt, significantly plagiarised, or student does not demonstrate an ability to use ethical frameworks and evaluate economic outcomes in real-world applications.Student poorly demonstrates an ability to use ethical frameworks and evaluate economic outcomes in real-world applications.Student satisfactorily demonstrates an ability to use ethical frameworks and evaluate economic outcomes in real-world applications.Student effectively demonstrates an ability to use ethical frameworks and evaluate economic outcomes in real-world applications.Student effectively demonstrates an ability to use ethical frameworks and evaluate economic outcomes in real-world applications. Student identifies differences across ethical frameworks.    
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