Final answer:
Fixed costs remain even when output is zero because they are sunk costs already incurred and cannot be recovered, such as rent for a factory. These costs stay constant regardless of production levels and are depicted as the vertical intercept on cost curves. Variable costs, in contrast, can be altered and fluctuate with production levels.
Step-by-step explanation:
The question pertains to fixed costs in a business context and why they remain even when there is no production. In the business world, a firm's total revenue must exceed its total costs to achieve profit. Fixed costs, as the name suggests, do not vary with the level of output; they are incurred even if the output is zero. This is because fixed costs are often sunk costs—expenses that have already been incurred and cannot be recovered. For example, rent for a manufacturing facility must be paid regardless of whether any goods are produced.
When it comes to managing costs, businesses can typically alter their variable costs, which change in relation to production levels. These costs give a clear picture of the firm's potential to reduce expenses and how much costs will rise with increased production. On the other hand, fixed costs do not provide such flexibility as they do not fluctuate with production volume. This is visually represented in cost graphs where fixed costs are depicted graphically as the vertical intercept of the total cost curve, indicating the expenses a business faces even when its production is zero.