A fixed cost is
A)the cost of any input with a fixed price per unit.
B)a cost which increases in a fixed proportion as output increases.
C)a cost that does not vary with output and the firm must pay it even if output is zero.
D)a cost that does not vary with output but the firm can avoid paying it if output is zero.

Question

Quizplus · Accepted Answer

A fixed cost is a cost that does not vary with output, so it is independent of the level of activity. The firm must pay this cost even if it produces zero output. Examples of fixed costs include rent, insurance premiums, property taxes, and salaries of permanent employees.

A Fixed Cost Is