Which of the following statements is true when referring to fixed costs?

• A. Fixed costs are directly proportional to the amount of labor used.
• B. Fixed costs increase as more units of output are produced.
• C. Fixed costs do not change as output varies.
• D. Fixed costs can be avoided by producing zero output.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of fixed costs in microeconomics. Fixed costs are costs that do not change with the level of output produced. They remain constant regardless of how much or how little is produced.
2. Step 2: Analyze the statement 'Fixed costs are directly proportional to the amount of labor used.' Since labor can be a variable input, fixed costs are not typically related to labor usage, so this statement is false.
3. Step 3: Consider the statement 'Fixed costs increase as more units of output are produced.' Because fixed costs remain constant regardless of output, this statement is false.
4. Step 4: Evaluate the statement 'Fixed costs do not change as output varies.' This aligns with the definition of fixed costs, making this statement true.
5. Step 5: Review the statement 'Fixed costs can be avoided by producing zero output.' Fixed costs are incurred even if output is zero (e.g., rent), so this statement is false.