Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Costs that change with the level of output
B
Costs that remain constant regardless of output levels
C
Costs that vary with production volume
D
Costs incurred only when production begins
Understanding the Answer
Let's break down why this is correct
Answer
Fixed costs are expenses that do not change regardless of how much a firm produces. This means that even if a company makes no products at all, it still has to pay these costs, such as rent for its building or salaries for permanent staff. For example, if a bakery pays $2,000 a month for its shop space, that cost remains the same whether it bakes 100 loaves of bread or 1,000. Understanding fixed costs is important for businesses because it helps them plan their budgets and make decisions about production levels. In short, fixed costs are a key part of a firm's overall expenses that must be managed carefully to ensure profitability.
Detailed Explanation
Fixed costs are expenses that do not change, no matter how much a company produces. Other options are incorrect because This option suggests that fixed costs change with output; This option implies that fixed costs vary with production.
Key Concepts
fixed costs
Topic
Cost Minimization in Firms
Difficulty
easy level question
Cognitive Level
understand
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