Final answer:
The statement is false because fixed costs per unit increase when production decreases as these costs are distributed over fewer units, raising the cost per unit. Fixed costs are expenses that do not change with the level of production, such as rent and salaries. Changes in the cost of production affect supply curves and quantities supplied at given prices.
Step-by-step explanation:
The statement that a decrease in production will ordinarily result in a decrease in fixed production costs per unit is false. Fixed costs, by definition, do not change with the level of production. They are expenses that have to be paid by a company, irrespective of any business activity. Examples include rent, salaries, and insurance. These costs remain constant even when the production volume changes.
However, when production levels decrease, the fixed cost per unit actually increases. This is because the same amount of fixed costs is spread over a smaller number of units, raising the cost allocated to each unit. Thus, reduced production leads to higher fixed costs on a per unit basis, which could adversely affect the company's profitability if the selling prices remain unchanged. Conversely, when production increases, the fixed cost per unit decreases, as the fixed expenses are distributed over more units, potentially improving profitability.
A change in the cost of production, such as an increase in variable costs, can lead to a shift in the supply curve. If a firm faces higher costs of production, it could result in lower profits at a given selling price, causing the firm to supply a smaller quantity of products at that price, leading to a leftward shift in the supply curve.