Learning curve in practice, Microeconomics

Learning Curve in Practice

* Scenario

- A new firm enters chemical processing industry.

* Do they:

1) Produce a low level output and sell at high price?

2) Produce a high level output and sell at low price?

* How would learning curve influence your decision?

* The Empirical Findings

- The study of thirty seven chemical products

- Average cost fell 5.5 percent per year

- For each doubling of plant size, the average production costs fall by 11 percent

- For each doubling of cumulative output, average cost of production falls by 27 percent

* Which is more significant, economies of scale or learning effects?

* Other Empirical Findings

- In semi conductor industry a study of 7 generations of DRAM semiconductors from 1974-1992 found learning rates averaged 20 percent.

- In aircraft industry learning rates are as high as 40percent.

* Applying Learning Curves
1) To determine if it is profitable to enter in the industry.

 2) To determine when profits will occur based on plant size and cumulative output. 

Posted Date: 10/12/2012 4:07:29 AM | Location : United States







Related Discussions:- Learning curve in practice, Assignment Help, Ask Question on Learning curve in practice, Get Answer, Expert's Help, Learning curve in practice Discussions

Write discussion on Learning curve in practice
Your posts are moderated
Related Questions
what is rational decision and why it requires one''s choices be consistent with one''s goals?

Private Returns Versus Social Returns As there is subsidisation of education by the state in all countries (and a little higher subsidisation in developing countries) it happe

negative slope on ppf represents what?

1. Ayanna grows herbs. Last year she grew 2,000 pounds of herbs in a year while using 250 square feet of land and 1 worker. This year she doubled her land to 500 square feet, doubl

Inflation And Unemployment: Inflation describes a persistent and an appreciable increase in the general price level. The inflation rate is measured as a percentage change in a

Explain Monetarist and Monetary policy Monetarist:    A group of economists who believe that alters in the money supply are the most effective instrument of government economi

Short run equilibrium - Perfect competition: In the short-run, the perfectly competitive firm maximizes its profit by producing output where MC=MR=P. This is shown in the diag

use a graphical illustration to describe briefly what the influence of each of the following be on the market supply of labour,(a) an increase in immigrants, (b) a reduction in wag

What is the difference between economics and business?  Economics is the study of how we, the people, engage ourselves in production, distribution and consumption of goods and