Which of the following is the correct statement about fixed costs?

• A. Fixed costs are zero when production is zero.
• B. Fixed costs increase as output increases.
• C. Fixed costs vary directly with the level of production.
• D. Fixed costs do not change as output changes.

Answer: (D)

Verified step by step guidance

1. Understand the definition of fixed costs: Fixed costs are expenses that do not change with the level of output produced. They remain constant regardless of how much or how little is produced.
2. Recall that fixed costs include items such as rent, salaries of permanent staff, and depreciation of equipment, which must be paid even if production is zero.
3. Analyze the statements given: If fixed costs were zero when production is zero, that would imply they depend on production, which contradicts their definition.
4. Similarly, if fixed costs increase as output increases or vary directly with production, they would be variable costs, not fixed costs.
5. Therefore, the correct statement is that fixed costs do not change as output changes, meaning they remain constant regardless of production level.