The presence of a learning curve may induce a decision maker in a startup firm to choose:
A) low levels of output to exploit economies of scale.
B) high levels of output to exploit economies of scale.
C) low levels of output to shift the average cost curve down over time.
D) high levels of output to shift the average cost curve down over time.
E) to produce more than one output.

Question

Quizplus · Accepted Answer

The presence of a learning curve means that over time, the firm will become more efficient at producing the output, resulting in a lower average cost. Therefore, the best choice would be to choose high levels of output to take advantage of the economies of scale and shift the average cost curve down over time. Choosing low levels of output may not allow for the full benefits of the learning curve to be realized.

The Presence of a Learning Curve May Induce a Decision