Final answer:
Fixed costs per unit do indeed change inversely with changes in the volume of production activity. As production increases, the fixed cost per unit decreases, while a decrease in production volume results in an increase in the fixed cost per unit.
Step-by-step explanation:
The question at hand involves understanding the behavior of fixed costs in relation to changes in the volume of production activity. In the world of business and economics, fixed costs are those costs that do not vary with the level of output. These are contrasted with variable costs, which do change with output. Fixed costs, such as rent, salaries, and insurance, are static in the short run and must be paid regardless of the firm's level of production.
So, do fixed costs per unit change inversely with changes in volume? The answer to this is Yes. As the volume of production increases, the fixed cost per unit decreases because the same amount of fixed costs is spread over more units. Conversely, as the volume of production decreases, the fixed cost per unit increases. This is because the unchanging total fixed costs are now allocated across fewer units.
Example:
If a company has fixed costs of $1,000 and it produces 100 units, the fixed cost per unit is $10. However, if the company increases its output to 200 units, the fixed cost per unit drops to $5. This inverse relationship between fixed cost per unit and production volume clearly shows that as production volume goes up, fixed cost per unit goes down, and vice versa.