Final answer:
Total fixed cost remains constant regardless of production volume, but unit fixed cost will decrease as volume increases since it is spread over more units. The statement that both unit fixed cost and total fixed cost will change as volume increases is FALSE.
Step-by-step explanation:
The question regards whether unit fixed cost and total fixed cost will change as volume increases. Fixed costs are costs that do not change with the level of output produced. At zero production, a certain fixed cost, say $160, is already present. When production begins, this fixed cost remains the same regardless of the quantity produced because it is not dependent on production levels. Total fixed costs remain constant regardless of the volume of goods or services produced within a relevant period. However, unit fixed cost, which is the fixed cost per unit, will decrease as the volume of units produced increases. The reason for this decrease is because the same fixed cost is spread out over a larger number of units.
As production increases, businesses add variable costs to fixed costs, where the total cost is the sum of variable costs plus the fixed cost. It's important to differentiate between fixed and variable costs to understand the financial dynamics of production. Therefore, total fixed costs remain unchanged, but unit fixed costs diminish per unit with increased production levels. To summarize the given statement in the question 'As volume increases, unit fixed cost and total fixed cost will change' is FALSE. While unit fixed cost decreases as the number of units produced increases, the total fixed cost remains the same.