Question

The experience curve suggests that cutting prices is a good strategy__________.A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.B. in industries characterized by high economies of scale.C. in the maturity stage of the industry life cycle.D. in the decline stage of the industry life cycle.

Answer 1

The experience curve suggests that cutting prices is a good strategy if it can induce greater demand and thereby help a firm travel down the experience curve faster.

A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.

Explanation:

The experience curve is a graphical representation expressing the relationship between the experience in producing a product and efficiency of production.

The concept of experience curve was first developed by Bruce D. The experience curve depicts that increase in experience of production of the product can cause reduction in price of production of the product. The price reduction of the good can cause increase in demand.

Gaining the experience in the business can help in increasing the advantage over the competition.