Question

A firm has determined, from past experience, that the learning curve for a new electronic component has a log-linear form with a slope coefficient of –0.10. What is the predicted short-run average variable cost after 10,000 units of a new product have been produced? The beginning short-run average total cost of the product is expected to be $1,000.

A. $398
B. $1,000,000
C. $10,000,000
D. None of the above is correct.

Answer 1

Answer: A. $398

Step-by-step explanation:

Beginning short-run average total cost of the product = Co = $1,000

Qt = 10,000 units

slope coefficient = 0.10

Ct = Co Qt^0.1 = (1000)(10000)^-0.10= $ 398