Question 1

Which of the following is a true statement about the experience curve and its effects?&#10;A) Unit costs are predictable.&#10;B) Cost reductions are automatic.&#10;C) Unit costs vary with exchange rates.&#10;D) Growth occurs in all manufacturing segments.

Accepted Answer

The experience curve suggests that as a company gains experience in production, unit costs tend to decrease predictably due to efficiencies and learning.

Question 2

Which of the following is LEAST likely to affect the experience curve?&#10;A) technical progress&#10;B) labor redesign&#10;C) specialization&#10;D) segmentation

Accepted Answer

Segmentation refers to dividing the market into smaller groups based on characteristics such as demographics or behavior. It is a marketing strategy and is not directly related to the experience curve, which is a production strategy. Therefore, segmentation is least likely to affect the experience curve. Technical progress, labor redesign, and specialization can all impact the experience curve by improving efficiency and reducing costs over time.

Question 3

According to the law of experience,unit costs cannot be predicted,but they can be reduced.

Accepted Answer

The law of experience, often referred to as the experience curve or learning curve, suggests that as a company gains experience in producing a product or service, its unit costs tend to decrease. This implies that with increased production and experience, companies can predict a trend of decreasing unit costs over time.

Question 4

An experience curve is primarily dependent on the ________.&#10;A) product life cycle&#10;B) marketing mix&#10;C) industry&#10;D) economy

Accepted Answer

An experience curve is primarily dependent on the specific industry in which a company operates. It refers to the observed phenomenon that as experience in a given industry increases, the costs of producing a unit of output tend to decrease. This can be due to a variety of factors such as improved production methods, increased efficiency, and economies of scale. Therefore, the product life cycle, marketing mix, and economy may all impact the overall success of a company, but they are not the primary drivers of the experience curve.

Question 5

A firm's profitability depends on experience curve effects.

Accepted Answer

Experience curve effects refer to the phenomenon where the more a company produces a certain product or service, the more efficient it becomes at doing so, leading to lower costs and increased profitability. Therefore, a firm's profitability can be influenced by experience curve effects.

Question 6

Computing the experience curve most likely helps a marketer to ________.&#10;A) predict a product's life cycle stage&#10;B) retain loyal business customers&#10;C) develop a pricing strategy&#10;D) improve a mature product

Accepted Answer

Computing the experience curve can help a marketer develop a pricing strategy by identifying the cost savings that occur as a result of increased production levels. This can help the marketer determine the appropriate pricing strategy to maintain competitiveness while also increasing profits. While understanding a product's life cycle stage and improving a mature product are important considerations for a marketer, computing the experience curve may not directly contribute to these goals. Retaining loyal business customers is also an important consideration, but it is not directly related to the experience curve.

Question 7

As manufacturing outputs increase,unit prices decrease.This is called the ________.&#10;A) penetration cost&#10;B) experience curve&#10;C) demand curve&#10;D) skimming price

Accepted Answer

The experience curve, also known as the learning curve, states that as production quantities double, the unit cost of a product decreases by a constant percentage. This cost reduction occurs due to the efficiencies gained through experience, learning, and streamlining production processes. Therefore, as manufacturing outputs increase, unit prices decrease due to the experience curve. The other options - penetration cost, demand curve, and skimming price - do not refer to this specific concept.

Question 8

According to the text,which industry would have the greatest reduction in unit costs based on its experience curve rate?&#10;A) personal computer&#10;B) microprocessor&#10;C) automobile&#10;D) airline

Accepted Answer

The microprocessor industry, known for rapid technological advancements and efficiency improvements, typically has a steep experience curve. This means that for each doubling of cumulative production, the industry sees significant reductions in unit costs, more so than industries like personal computers, automobiles, or airlines, which may have less steep experience curves due to slower rates of innovation or higher fixed costs.

Question 9

A firm with a higher market share will most likely experience a higher return on investment.

Accepted Answer

A firm with a higher market share is generally better positioned to generate larger profits and revenue, which can result in a higher return on investment. This is because a larger market share can allow a firm to take advantage of economies of scale, gain pricing power, and earn greater customer loyalty.

Question 10

According to the law of experience,unit costs decline by ________ each time cumulative output ________.&#10;A) one-half; doubles&#10;B) a fixed percent; doubles&#10;C) a varying percent; triples&#10;D) one-third; increases at an equal rate

Accepted Answer

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.

Question 11

What is an experience curve? What methods can a firm use to improve its experience curve?

Accepted Answer

The answer of What is an experience curve? What methods...

Question 12

The experience curve concept is especially important to firms that pursue a strategy of ________.&#10;A) brand loyalty&#10;B) industry alliance&#10;C) niche marketing&#10;D) cost leadership

Accepted Answer

The answer of The experience curve concept is especially important...

Deck 10: Note : Experience Curve Effects on Cost Reduction