February 2016
Beginner to intermediate
500 pages
33h 40m
English
Average cost may fall over time for three reasons. First, operating at a larger scale in the long run may lower average cost due to increasing returns to scale (IRS). Second, technological progress (Chapter 5) may increase productivity and thereby lower average cost. Third, a firm may benefit from learning by doing: the productive skills and knowledge that workers and managers gain from experience. Workers who are given a new task may perform it slowly the first few times they try, but their speed increases with practice. Managers may learn how to organize production more efficiently, discover which workers to assign to particular tasks, and determine where more inventories are needed and where they can be reduced. Engineers ...