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Chapter 24: Problem 13

An article in the Los Angeles Times about driverless trucks stated, "Trucking will likely be the first type of driving to be fully automated - meaning there's no one at the wheel." The article added that there is a financial incentive for automating trucks because "trucking is a \$700-billion industry, in which a third of costs go to compensating drivers." How are driverless trucks likely to affect costs to businesses of transporting goods? How are they likely to affect the short-run aggregate supply curve and the long-run aggregate supply curve?

Short Answer

Expert verified
Driverless trucks would likely reduce the costs to businesses of transporting goods significantly by saving on labor costs. In terms of supply curves, both the short-run and long-run aggregate supply curves would shift to the right. This shift indicates increased quantities of goods and services supplied at the same price levels due to increased efficiency and lower costs.

Step by step solution

01

Impact on Costs

One should understand that if trucks become fully automated, companies would save significant costs on compensating drivers. As the article states, a third of the costs in the trucking industry, equivalently, about \$233 billion, goes to driver compensation. With the automation, these costs would likely substantially decrease, reducing the overall costs of transporting goods.
02

Impact on Short-Run Aggregate Supply (SRAS) Curve

The short-run aggregate supply curve shows the total quantity that firms across the economy will produce and sell at each price level in the short-term period when the prices of resources (like labour) are fixed. With driverless trucks, labour costs for transport are reduced, increasing profitability for firms and enabling more production at the same price level. Thus, the SRAS curve will shift to the right, meaning a greater quantity of goods and services supplied at the same price levels.
03

Impact on Long-Run Aggregate Supply (LRAS) Curve

The long-run aggregate supply curve shows the total quantity that firms across the economy will produce and sell at each price level when the prices of resources can fully adjust. Automation increases efficiency and reduces resource costs (in this case labour), thus increasing the economy's potential output. Therefore, the LRAS curve would also shift to the right, indicating an increase in the natural level of output at the same price levels.

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Most popular questions from this chapter

From August 2009 to May \(2017,\) the Standard \(\&\) Poor's Index of 500 stock prices increased by more than 135 percent, while the consumer price index increased by less than 15 percent. Briefly explain what effect, if any, these changes had on the aggregate demand curve.

Explain why the long-run aggregate supply curve is vertical.

Why does the short-run aggregate supply curve slope upward?

Draw a dynamic aggregate demand and aggregate supply graph showing the economy moving from potential GDP in 2019 to potential GDP in \(2020,\) with no inflation. Your graph should contain the \(A D,\) SRAS, and LRAS curves for both 2019 and 2020 and should indicate the short-run macroeconomic equilibrium for each year and the directions in which the curves have shifted. Identify what must happen for the economy to experience growth during 2020 without inflation.

Draw a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium. a. Assume that there is a large increase in demand for U.S. exports. Show the resulting short-run equilibrium on your graph. In this short-run equilibrium, is the unemployment rate likely to be higher or lower than it was before the increase in exports? Briefly explain. Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how have the values of each of the following changed relative to what they were before the increase in exports? i. \(\quad\) Real GDP ii. The price level iii. The unemployment rate b. Assume that there is an unexpected increase in the price of oil. Show the resulting short-run equilibrium on your graph. Explain how the economy adjusts back to long-run equilibrium. In this short-run equilibrium, is the unemployment rate likely to be higher or lower than it was before the unexpected increase in the price of oil? Briefly explain. When the economy has adjusted back to long-run equilibrium, how have the values of each of the following changed relative to what they were before the unexpected increase in the price of oil? i. \(\quad\) Real GDP ii. The price level iii. The unemployment rate
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