Final answer:
Fixed costs are expenditures that remain constant regardless of a company's level of production or sales, such as rent for premises, machinery costs, and some marketing expenses.
Step-by-step explanation:
The costs a company incurs whether it sells something or not are known as fixed costs. These are expenses that do not vary with the level of production or sales. For example, the rent on a factory or retail space remains constant regardless of how much is produced or sold. Other examples of fixed costs include the cost of machinery, equipment, research and development, and certain marketing expenses like advertising to build a brand.
Fixed costs are characterized by their invariability in the short run and are contrasted with variable costs, which fluctuate with production levels. In the realm of business, understanding the distinction between these two types of costs is critical for making informed decisions about pricing and production strategies.