Which statement best describes fixed costs?

• A. They Vary With Sales
• B. They Are Only One-Time Costs
• C. They Are Always Variable
• D. They Do Not Change Over Time Or With Output

Answer: (D)

Fixed costs are costs that stay the same regardless of how much you produce in the short run. They include items like rent, salaries of permanent staff, and depreciation. Because these costs don’t change as output increases or decreases, the statement that fixed costs do not change with output is the best description. They’re not necessarily one-time costs, and they aren’t always variable. In a longer horizon, some fixed costs can change when contracts expire or business decisions are made, but within a given period they remain constant as production varies.