Question

Your company is considering developing and building a new passenger plane. Average variable costs of production are expected fall as in Wright's learning curve model. You have the following information:
Total research, development, testing, and evaluation (RDT&E) costs (fixed):					$10 billion
The following costs are variable costs (they don't include the $10 billion)
Expected average cumulative cost of the first 100 planes:					$300 million
Expected average cumulative cost of the first 300 planes:					$190 million

What is the learning rate

Answer 1

Cost required for the nth unit = Cost required for the first unit Lⁿ

Where L = learning rate

n = number of times cost is doubled

$ 190 million = $ 300 million L^(300/100)

0.6333 = L³

L =

Learning rate = 85.88%