Which of the following is an example of a fixed cost for a firm?

• A. Electricity costs that vary with production
• B. Wages paid to hourly workers
• C. Monthly rent for factory space
• D. Cost of raw materials

Answer: (C)

Verified step by step guidance

1. Understand the definition of fixed costs: Fixed costs are expenses that do not change with the level of production or output. They remain constant regardless of how much a firm produces.
2. Identify the characteristics of each option: Electricity costs that vary with production are variable costs because they change as production changes.
3. Wages paid to hourly workers are variable costs since they depend on the number of hours worked, which can vary with production.
4. Monthly rent for factory space is a fixed cost because it must be paid regardless of the level of production; it does not fluctuate with output.
5. Cost of raw materials is a variable cost because it increases or decreases depending on the quantity of goods produced.