Final answer:
Warranty service, processing of complaints, and costs of litigation are examples of external failure costs, which are costs arising post-delivery of goods or services leading to customer dissatisfaction and potential legal action.
Step-by-step explanation:
Warranty service, processing of complaints, and costs of litigation are examples of external failure costs. These costs occur when products or services fail to meet quality standards after they have been delivered to the customer and are a reflection of the social costs and additional external costs associated with a failure in the market mechanisms that regulate quality. Unlike internal failure costs, which are associated with defects found before a product reaches the customer, external failure costs arise due to defects discovered after delivery, leading to dissatisfaction and potential legal actions by the customer. A significant aspect of these costs involves trying to mitigate the negative impact on the company's reputation and prevent future losses.