Final answer:
Fixed costs are expenses that do not change with the level of production. Examples include rent and insurance. They are not variable in the short term and do not decrease in total as production increases.
Step-by-step explanation:
The question concerns the nature of fixed costs in the context of business and economics. Fixed costs are those expenses that remain constant regardless of the level of production or output. They differ from variable costs, which change in direct proportion to the level of output.
Regarding the truthfulness of the statements provided:
- Statement A) is incorrect. Fixed costs do not change with the level of production.
- Statement B) is correct. Rent and insurance are common examples of fixed costs.
- Statement C) is incorrect. Fixed costs are generally not variable in the short term; they remain constant.
- Statement D) is incorrect. Fixed costs per unit of production may decrease as production increases due to the spreading of costs over a larger number of units, but the total fixed costs remain constant.
It is essential to understand that fixed costs are sunk costs and do not impact the marginal cost of producing additional units in the short term. Examples of fixed costs include rent on a facility, machinery costs, research and development, and brand advertising. These costs are incurred before producing any output and should not play a role in economic decisions regarding future production or pricing.