PRC-3 · Chapter 12 · Question 8 of 69
A firm has to pay Rs. 500,000 every month for the lease of its building, regardless of whether it produces 10,000 units or completely shuts down production for the month. This expense is classified as a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Fixed cost
Explanation
Fixed costs are expenses that do not vary with the level of output in the short run. They must be paid even if production is zero.
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