Question

Consider two firms producing smartphones. One uses a highly automated robotics process, while the other uses human workers on an assembly line and pays overtime when there is heavy production demand. a. Which firm will have higher profits in a recession?

Answer 1

Answer: The firm that is using human workers.

Explanation:

A recession is simply referred to as a contraction that occurs in the business cycle when there is a reduction in the economic activities and this invariably leads to reduction in expenses by the consumers.

Since there is recession, there won't be need to pay the workers overtime as there won't be heavy production, therefore the firm that is using human workers will have higher profit in recession.