Assume the Multiplier Method Is Used and the Multiplier Is

question 122

Multiple Choice

Assume the multiplier method is used and the multiplier is determined to be 4 based on experience. Accounting records show that the measured external failure costs are $550,000. Then the total external failure costs are estimated to be

• A) $166,667.
• B) $38,500.
• C) $2,200,000.
• D) $4,500,000.

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Definitions:

Derived Demand

The demand for a factor of production resulting from the demand for the final product it helps to produce.

Factor of Production

A rephrased definition would be the essential elements required for producing goods and services, encompassing land, labor, capital, and entrepreneurship.

Derived Demand

The demand for a product or resource resulting from the demand for another product or service.

Outputs

Refers to the goods or services produced by a business or an economic system.