Final answer:
Experience curves are also known as learning curves, illustrating efficiency gains through cumulative production experience. This concept involves an initial rapid decrease in costs followed by a leveling off period and a subsequent phase where production efficiencies continue to increase at a stable rate.
"The correct option is approximately option B"
Step-by-step explanation:
Another name for experience curves is learning curves. This concept is widely used in business to understand the efficiency gains that are achieved as a result of cumulative production experience. When a company makes more of a certain product, they generally become better at it—faster and with fewer errors—leading to lower costs per unit over time.
The experience curve is characterized by distinct phases:
- Part A: Begins with a nonzero y-intercept with a downward slope that levels off at zero.
- Part B: Begins at zero with an upward slope that decreases in magnitude until the curve levels off.
- Part C: Begins at zero with an upward slope that then increases in magnitude until it becomes a positive constant.
This effect is similar to the concepts covered in the Production, Costs and Industry Structure chapter in business studies, where the focus is on understanding how production and costs are influenced by industry dynamics and production output. The experience curve effect is particularly relevant for managers and decision-makers who need to anticipate and plan for changes in operational efficiency and cost structure as their production volume changes over time.
The different types of curves described in the information indicate not just learning over time but also varying behaviors during different periods of production or learning. For example, the curve described as "the first 15 minutes is a curve that is concave downward, the middle portion is a straight line with slope zero, and the last portion is a concave upward curve" captures the rapid initial gains in learning or efficiency, followed by a period of steady performance, and then a phase where improvements are harder to achieve as the system matures.