The experience curve concept:
A)helps a company realize both learning effects and diseconomies of scale.
B)suggests that unit manufacturing costs increase by a certain amount each time output is increased.
C)is very important in industries that mass-produce a standardized output.
D)suggests that achieving low costs allows a firm to charge a premium price.
E)is least likely to bottom out as long as the company does not stop production.

Question

The experience curve concept:
A)helps a company realize both learning effects and diseconomies of scale.
B)suggests that unit manufacturing costs increase by a certain amount each time output is increased.
C)is very important in industries that mass-produce a standardized output.
D)suggests that achieving low costs allows a firm to charge a premium price. 
E)is least likely to bottom out as long as the company does not stop production.

Quizplus · Accepted Answer

The experience curve concept is very important in industries that mass-produce a standardized output, as it suggests that unit manufacturing costs decrease as cumulative output increases, due to learning effects and economies of scale. This allows companies to achieve a competitive advantage through lower costs and potentially higher profits. Option A is incorrect as the experience curve concept also accounts for economies of scale, not just diseconomies of scale. Option B is incorrect as the concept suggests that unit costs decrease, not increase, with increased output. Option D is incorrect as achieving low costs generally allows a firm to charge a lower price, not a premium price. Option E is unclear and not well-supported by the explanation of the experience curve concept.

The Experience Curve Concept