The experience curve can be defined as:
A)A law relating doubling of cumulative volume output to constant percentage reduction in average manufacturing time and labour cost.
B)A law according to which the unit cost of value added declines by a constant percentage of 30% each time cumulative output doubles
C)An observation that direct costs decrease when production increases
D)An observation of the systematic acceleration in output of airplanes and ships during time of war.

Question

Quizplus · Accepted Answer

The experience curve is a concept that states that the cost of producing a product decreases with the cumulative volume of production. Specifically, for every doubling of cumulative volume output, there is a constant percentage reduction in average manufacturing time and labor cost. This is often referred to as the "learning curve" or the "progress curve." Therefore, option A is the correct definition of the experience curve. Option B is an incorrect definition because the constant percentage reduction is not always 30%. Option C is too broad and not specific to the concept of the experience curve, and option D is a specific example of the experience curve observed in certain industries during specific periods of time, but it does not define the overall concept.

The Experience Curve Can Be Defined As