Fixed costs are best described as costs that do not change with output in the short run. Which option reflects this?

Fixed costs are best described as costs that do not change with output in the short run. Which option reflects this?

• A. Cost That Varies With Output
• B. Cost That Does Not Change With Output in the Short Run
• C. Cost Paid Only If Production Occurs
• D. Cost That Increases With Rainfall

Answer: (B)

Fixed costs are expenses that stay the same regardless of how much you produce, at least in the short run. These include things like rent, depreciation, and permanent salaries that you must pay whether you’re producing a lot or very little. That’s why the best description is the choice that says a cost does not change with output in the short run. In contrast, variable costs change with production (materials, direct labor tied to output), a cost paid only if production occurs isn’t a reliable property of fixed costs, and costs that increase with rainfall aren’t related to production volume.

Fixed costs are expenses that stay the same regardless of how much you produce, at least in the short run. These include things like rent, depreciation, and permanent salaries that you must pay whether you’re producing a lot or very little. That’s why the best description is the choice that says a cost does not change with output in the short run. In contrast, variable costs change with production (materials, direct labor tied to output), a cost paid only if production occurs isn’t a reliable property of fixed costs, and costs that increase with rainfall aren’t related to production volume.