A Product Was Priced Assuming an 80% Learning Curve

question 51

Essay

A product was priced assuming an 80% learning curve. How much extra labor (in %) will be required on the 4th product if the learning curve is actually 90%?

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Definitions:

Long-run Average Total Cost

The per-unit cost of production when all inputs, including those typically fixed, can be varied, showing economies of scale if downward sloping.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the average cost of production falls with increasing output.

Constant Returns to Scale

A situation in production where increasing the input of all resources by any proportion yields an increase in output by the same proportion.

Long-run Average Total Cost

The per unit cost of production when all inputs, including capital, are variable, assuming optimal efficiency.