The High-Low Method Is Used to ________

question 21

Multiple Choice

The high-low method is used to ________.

• A) determine the highest price that can be charged for a product
• B) separate mixed costs into their variable and fixed components
• C) identify the relevant and irrelevant costs of a business
• D) determine the sales level at highest capacity

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Definitions:

Total Surplus

Total surplus refers to the sum of consumer surplus and producer surplus in a market, representing the overall benefit that market participants gain from engaging in trade.

High-cost Producer

A producer or company which has higher costs of production compared to competitors, often due to inefficient processes or higher input costs.

Low-cost Producer

A manufacturer or service provider with a competitive advantage allowing them to offer goods or services at a lower price than competitors, often due to operational efficiencies.

Consumer Surplus

The variance between the aggregate amount consumers can and will pay for a good or service versus the amount they actually spend on it.