Q. 24.3( 3 Votes )

Define fixed cost

Answer :

Fixed costs are those costs that do not vary with the level of output. It refers to the cost that remains fixed whatever the changes in the level of output produced. It refers to the cost incurred for hiring the fixed factors of production, whose units cannot be altered in the short run. Thus, the fixed cost remains the same in the short run. It is incurred by the firm irrespective of the level of output, i.e., even when no units of output are produced; fixed cost is incurred. Thus, the fixed cost curve is a horizontal line parallel to the X-axis.

E.g., interest payments, allowances for depreciation, rent, etc.

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