Some firms become more efficient (higher productivity, lower costs) as they accumulate experience in the form of past production. We refer to this as a "learning curve effect." Suppose a company's cost function, which relates its average cost of production (AC) to its cumulative output Q (accumulated output produced in past periods) and its plant size q (output produced in the current period), is given by AC 20 0.1Q + 30q. From this cost function, we can conclude that: A learning curve effect does not exist because AC decreases with more Q. A learning curve effect does exist because AC decreases with more Q. OA learning curve effect does exist because AC decreases with more q OA learning curve effect does not exist because AC increases with more q
Some firms become more efficient (higher productivity, lower costs) as they accumulate experience in the form of past production. We refer to this as a "learning curve effect." Suppose a company's cost function, which relates its average cost of production (AC) to its cumulative output Q (accumulated output produced in past periods) and its plant size q (output produced in the current period), is given by AC 20 0.1Q + 30q. From this cost function, we can conclude that: A learning curve effect does not exist because AC decreases with more Q. A learning curve effect does exist because AC decreases with more Q. OA learning curve effect does exist because AC decreases with more q OA learning curve effect does not exist because AC increases with more q
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Transcribed Image Text:Some firms become more efficient (higher productivity, lower costs) as they accumulate experience
in the form of past production. We refer to this as a "learning curve effect." Suppose a company's
cost function, which relates its average cost of production (AC) to its cumulative output Q
(accumulated output produced in past periods) and its plant size q (output produced in the current
period), is given by
AC 20 0.1Q + 30q.
From this cost function, we can conclude that:
A learning curve effect does not exist because AC decreases with more Q.
A learning curve effect does exist because AC decreases with more Q.
OA learning curve effect does exist because AC decreases with more q
OA learning curve effect does not exist because AC increases with more q
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