Question

A fixed cost is a cost which select one:

a. varies in total with changes in the level of activity.
b. remains constant per unit with changes in the level of activity.
c. varies inversely in total with changes in the level of activity.
d. remains constant in total with changes in the level of activity.

Answer 1

The answer is d. For example you may pay a fixed rate of $300 a month for rent for a place to operate your business. Whether you produce an output of 0 or 12000 units (the level of activity), you will pay $300 a month regardless. This is a fixed cost.