Question

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve?

Answer 1

When the firm achieves an 80 percent learning curve and all other factors remain to be constant. Then that means there should be a 20 percent reduction in the per-unit cost of a product. Since 20 percent of $5 is $1, then the new per-unit cost is $4.