As Preventive and Appraisal Costs Increase, Internal and External Failure

question 70

Multiple Choice

As preventive and appraisal costs increase, internal and external failure costs are expected to

• A)decrease.
• B)increase.
• C)remain the same.
• D)vary with no relation to preventive and appraisal costs.

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Definitions:

Perfect Competition

A market structure characterized by many buyers and sellers, freedom of entry and exit, and a homogeneous product.

Perfectly Elastic

A situation in economic theory where the quantity demanded or supplied of a good changes infinitely in response to any change in price.

Demand Curve

A diagram depicting how the demand for an item varies with its price, generally characterized by a downward trajectory.

Marginal Revenue

The additional earnings gained by selling an extra unit of a good or service.