If a Company Consistently Produces and Sells Defective Products, Which

question 10

Multiple Choice

If a company consistently produces and sells defective products, which type of quality cost is likely to be the most costly in the long-run?

• A) Appraisal (detection) costs
• B) External failure costs
• C) Internal failure costs
• D) Prevention costs

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Definitions:

Risk-Return Relationship

The principle that potential return increases with an increase in risk, describing the trade-off between the desire for the lowest possible risk and the highest possible return.

APT

Arbitrage Pricing Theory, a model that predicts the expected return of a financial asset based on its sensitivities to macroeconomic factors.

Risk Premiums

The extra return expected by investors for holding a risky investment instead of a risk-free asset.

Benchmark Market Portfolio

A standard or reference against which the performance of a security, mutual fund, or investment manager can be measured.