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 the firm must pay even if output is zero.
D) both b and c
E) all of the above

Question

Quizplus · Accepted Answer

A fixed cost is a cost that remains constant irrespective of the level of production or output. Therefore, the firm must pay fixed costs even if output is zero. Option A is incorrect because the fixed cost is not related to the cost of any input with a fixed price per unit. Option B is incorrect because the cost which increases in a fixed proportion as output increases is a variable cost. Option D is incorrect because it combines a variable cost with a fixed cost. Option E is also incorrect as it includes all the options which are incorrect.

A Fixed Cost Is