Costs that are independent of the firm's level of output are called
A) fixed costs.
B) marginal costs.
C) opportunity costs.
D) sunk costs.

Question

Quizplus · Accepted Answer

Fixed costs are costs that do not change with the level of output produced by the firm. These include things like rent, salaries, and insurance premiums. Marginal costs are the additional cost of producing one more unit of output and will therefore vary based on the level of production. Opportunity costs are the cost of forgoing one option in favor of another and will also vary based on the specific decision being made. Sunk costs are costs that have already been incurred and cannot be recovered, and do not affect future production decisions.

Costs That Are Independent of the Firm's Level of Output