Final answer:
Statement (c) 'unit fixed costs increase or decrease inversely in relation to the activity driver' is NOT a correct statement
about cost behaviour, as unit fixed costs actually decrease per unit as production increases due to the distribution of total fixed costs over more units.
Step-by-step explanation:
The question asks which statement concerning cost behaviour is NOT correct.
Let's address each statement. Statement (a), 'according to economics, in the long run, all costs are variable,' is a correct statement.
In the long run, all costs are indeed considered variable because firms have the flexibility to adjust all input levels. Statement (b), 'variable costs increase in total in relation to the activity driver,' is also correct since variable costs, such as labor and raw materials, do indeed increase or decrease as the level of output changes.
Statement (c), 'unit fixed costs increase or decrease inversely in relation to the activity driver,' is not a correct statement about cost behaviour because unit fixed costs remain constant per unit of production;
however, the total fixed costs remain constant regardless of the level of activity, but on a per unit basis, fixed costs would decrease as activity level increases due to the spreading of the fixed costs over more units.