Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of these statements is NOT true about fixed costs?

1. Fixed costs remain the same regardless of the quality of goods produced.

2. There are no such things as fixed costs.

3. Fixed costs are part of the total cost of production.

4. Every business incurs fixed costs when it decides to open.

The correct answer is: There are no such things as fixed costs.

Fixed costs are an essential concept in economics and business operations. These costs are expenses that do not change in relation to the level of goods or services produced by a business. Understanding fixed costs helps businesses determine pricing, profitability, and overall financial health. The statement that there are no such things as fixed costs is not accurate. In reality, fixed costs exist and are crucial for businesses. Examples of fixed costs include rent, salaries, and insurance, which need to be paid regardless of how much product is made or sold. A business incurs these costs as part of its commitment to operate, offering a predictable expense that can be factored into decision-making. The other statements accurately reflect the nature of fixed costs. They indeed remain the same regardless of production volumes, are included in the total cost of production, and are typically incurred by every business when it begins operations. By understanding the concept of fixed costs, businesses can better plan for their financial needs and strategic goals.