Discuss the important differences between economies of scale and learning effects.
What will be an ideal response?
There are some important differences between economies of scale and learning effects:
Learning effects occur over time as output is accumulated, while economies of scale are captured at one point in time when output is increased. Although learning declines at some point, there are no diseconomies to learning (unlike diseconomies to scale).
In some production processes (e.g., a simple one-step process in the manufacture of steel rods), effects from economies of scale can be quite significant, while learning effects are minimal. In contrast, in some professions (brain surgery or the practice of estate law), learning effects can be substantial, while economies of scale are minimal.
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