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

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Multiple Choice

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

Fixed costs stay constant regardless of how much you produce in the short run. Rent fits this pattern because the payment is the same each period whether you operate at low or high output. In contrast, costs tied to materials used per unit rise with production, so they are variable. Commissions depend on sales and move with activity, also variable. Utilities often have a fixed base plus variable usage, making them a mixed cost rather than a pure fixed cost. So rent is the clear example of a fixed cost.

Fixed costs stay constant regardless of how much you produce in the short run. Rent fits this pattern because the payment is the same each period whether you operate at low or high output. In contrast, costs tied to materials used per unit rise with production, so they are variable. Commissions depend on sales and move with activity, also variable. Utilities often have a fixed base plus variable usage, making them a mixed cost rather than a pure fixed cost. So rent is the clear example of a fixed cost.

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