Bava Company Wants to Develop a Cost Function for Its

question 20

Multiple Choice

Bava Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available: $\begin{array}{llr}& \text { Direct } & \text { Maintenance } \\\text { Month } & \text { Labour Hours } & \text { Costs Incurred }\\\text { June } & 4,000 & \$ 900 \\\text { July } & 6,500 & 1,325 \\\text { August } & 7,000 & 1,500 \\\text { September } & 5,500 & 1,150\end{array}$ Using the high-low method, what is the fixed maintenance cost?

• A) $500
• B) $300
• C) $200
• D) $100

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Definitions:

Consumer Surplus

The gap between the price consumers are prepared to pay for a good or service and the price they actually end up paying.

Consumer Surplus

The gap between what consumers are prepared to spend on a good or service and the actual amount they end up paying.

Consumer Surplus

The divergence in total intended consumer expenditure on a product or service and the total actual expenditure.

Market Power

The ability of a company or entity to influence or control the terms and conditions of the market to some degree, affecting prices and competition.