In the context of automation, which of the following best describes a potential impact on the labor market according to microeconomic theory?

• A. Automation can increase structural unemployment by replacing certain types of labor with machines.
• B. Automation always leads to higher wages for all workers.
• C. Automation eliminates the need for any human labor in all industries.
• D. Automation has no effect on the allocation of resources in the economy.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of automation in microeconomics, which refers to the use of machines and technology to perform tasks previously done by human labor.
2. Step 2: Recognize that automation can change the demand for different types of labor, often reducing the need for certain skills while increasing demand for others.
3. Step 3: Learn about structural unemployment, which occurs when there is a mismatch between workers' skills and the skills demanded by employers, often caused by technological changes like automation.
4. Step 4: Analyze how automation can replace certain types of labor, leading to some workers losing jobs if their skills become obsolete, thus increasing structural unemployment.
5. Step 5: Contrast this with incorrect statements: automation does not always raise wages for all workers, does not eliminate all human labor, and does affect resource allocation by shifting labor and capital between industries.