(Last Word) Fixed costs for a firm are analogous to
A) the dirt that fills up the financial hole.
B) digging a deeper financial hole by producing when prices are too low.
C) the cost of the shovel needed to fill the financial hole.
D) starting out in a hole that represents economic losses if the firm produces nothing.

Question

Quizplus · Accepted Answer

Fixed costs are costs that do not vary with the level of production or sales, meaning that they exist even if the firm produces nothing. This can put the firm in a hole where it starts out with economic losses, similar to starting out in a hole if the firm produces nothing. Therefore, option D is the best choice. The other options do not accurately reflect the relationship between fixed costs and a firm's financial situation.

(Last Word) Fixed Costs for a Firm Are Analogous to