AI Megacomputer Co. negotiates a deal with the local utility company to provide them with 1 million kWh per month. Their contract stipulates that if AI Megacomputer Co. uses more than 1 million kWh in a month they will pay a variable rate of \$0.30 per kWh. How many relevant ranges does AI Megacomputer Co. have in measuring their electricity use, and why?

One: A single contract specifies all the business’ costs, so there is only one relevant range.

One: Since the rate is \$0.30 per kWh, it is irrelevant whether they pay for some of this cost in advance.

Two: Since the cost is fixed below 1 million kWh and variable above 1 million kWh there are 2 relevant ranges.

Three: AI Megacomputer Co. has a relevant range when they use no power, another when they use 0-1 million kWh and a third when they use more than 1 million kWh.