Asked by Deanna Overton on Sep 28, 2024
Verified
According to the law of experience,unit costs decline by ________ each time cumulative output ________.
A) one-half; doubles
B) a fixed percent; doubles
C) a varying percent; triples
D) one-third; increases at an equal rate
Experience Curve
A concept that suggests that as a company gains experience in producing a product or service, its unit production costs decrease due to learning and efficiencies.
Cumulative Output
The total amount of product or work produced over a specific period.
Fixed Percent
A predetermined percentage rate applied in various financial and operational contexts, such as investment returns or budget allocations.
- Identify the correlation between unit costs, production levels, and the impacts of experience curve.
- Analyze how cumulative output influences unit costs in relation to the experience curve.
Verified Answer
HW
Harrison Wiese1 day ago
Final Answer :
B
Explanation :
According to the law of experience, unit costs decline by a fixed percentage each time cumulative output doubles. This is known as the "learning curve" or the "experience curve." The percentage decline varies by industry and product, but it is usually between 10% and 30%. As cumulative output increases, workers become more skilled, processes become more efficient, and economies of scale are achieved, leading to lower unit costs. Therefore, the correct answer is B, a fixed percent; doubles.
Learning Objectives
- Identify the correlation between unit costs, production levels, and the impacts of experience curve.
- Analyze how cumulative output influences unit costs in relation to the experience curve.