Question

It has been observed in the aircraft industry that, each time cumulative output of airframes was doubled, unit costs typically declined to 80 percent of their previous level. This is an example of:

Answer 1

Answer:

the experience curve

Explanation:

The experience curve refers to a company having lower production costs due to increasing experience of the manufacturing process.

This concept applies to most activities in life, do you remember "practice makes perfect", well practice is equal to experience. For example the first time you drove a car, it probably took you a long time to go from your point of origin to your destination. Your driving inexperience increased the costs of driving from one place to another (more time and fuel spent). But after a while, when driving was something normal you are able to drive the same distance at a lower cost (less time and fuel).

Imagine for a car company that is trying out a new model. The first units are usually assembled with several flaws that must be corrected and are used to research possible design or equipment flaws. Those failures are corrected as the workers acquire more experience.