Final answer:
The term for the phenomenon where the cost per unit decreases as sales increase is the Experience Curve. It highlights increased efficiency and economies of scale as companies produce more units over time, leading to reduced average costs. The correct option is C) Experience Curve.
Step-by-step explanation:
The term that describes the effect where the cost per unit of a new product decreases as the total sales increase is known as the Experience Curve. This effect occurs because as companies produce more of a product, they become more efficient and learn how to reduce costs through practices such as spreading fixed costs over more units, negotiating better terms with suppliers, or improving processes and technology.
Not to be confused with the Multiplier Effect, which describes how an increase in expenditure results in a larger increase in equilibrium output, the Experience Curve specifically relates to the reduction in costs due to gained efficiency and skill over time.
The concept is closely related to economies of scale, which refer to the cost advantages that a business obtains due to scaling up production and becoming more efficient. These concepts are important for businesses in high-tech industries or any field where large-scale production is possible and cost reduction over time is critical for competitiveness.