Refer to Figure 8

question 2

Multiple Choice

Refer to Figure 8.6,which shows just three of a firm's various possible short-run average cost curves.Which of the following statements is true?

• A) The firm experiences increasing returns to scale at production levels above 130 units of output.
• B) The firm experiences constant returns to scale.
• C) The firm experiences increasing returns to scale up to a production level of 130 units of output.
• D) The firm experiences decreasing returns to scale up to a production level of 130 units of output.

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Definitions:

External Failure Cost

Costs incurred when a product fails to meet quality standards after being delivered to the customer, including returns, repairs, and warranty claims.

Appraisal Cost

The cost associated with evaluating or inspecting products or materials to ensure they meet the necessary quality standards.

Prevention Cost

Costs incurred to prevent defects in products or services, part of Quality Costs.

Internal Failure Costs

Costs incurred when a product or service does not meet quality standards before being delivered to the customer, including scrap and rework expenses.