Fixed costs are
A) costs that never change.
B) costs that a firm incurs even when output is zero.
C) not actually costs since they do not affect the decisions of a firm.
D) costs that increase at a constant rate when output increases.

Question

Quizplus · Accepted Answer

Fixed costs are costs that a firm incurs even when output is zero, such as rent, salaries, insurance, and depreciation of capital. These costs do not vary with changes in output in the short run, but may change over time in the long run. Thus, they are called fixed costs because they do not vary with changes in output in the short run, but are fixed or unchanging regardless of the level of output.

Fixed Costs Are