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?
b. in a boom?
c. which firm's stock will have a higher beta?

Answer 1

A. Which Firm will have Higher Profits in a Recession Period ?
During a recession period trade and industries are unsuccessful and there is allot of unemployment. During the period supply in the market and level of output in the company are likely to be  low. Robotic automated process seems to be relatively cheap under high production output in a firm. Also the cost of maintenance of machinery is quite high which the firm can`t cater for during the period. In this period human workers are more recommended as the cost of production will be accounted for due to small numbers of employees where the cost of wages and salaries is quite low.
B. Which Firm will have a Higher Profit During a Boom?
During a boom the industry experiences a period of economic success as demand in the market is high. Automated robotics process are machines and carry out their work with allot of efficiency. Compared to human beings they are relatively faster and more efficient. This will will help the industry meet its high level of production target. They also reduce the cost of production as their maintenance cost is low under large scale production. Human workers seem expensive during this period because cost of wages and salaries is subject per-head.
The Firm with a Higher Beta.
The automated robotics firm will have a higher beta  this is because the output will be high leading to increased supply and sale for better profitability. The robots will also function as an asset to the firm increasing the net worth to the company.