Which type of costs remain constant as you produce more output?

• A. Fixed costs
• B. Variable costs
• C. Marginal costs
• D. Average costs

Answer: (A)

Fixed costs stay the same regardless of how much you produce in the short run. They’re expenses that don’t change with output, like rent, insurance, and salaries of permanent staff. Because these costs don’t vary with production level, they remain constant as output grows. Variable costs, on the other hand, rise with output since they depend on the amount of inputs used (materials, hour-by-hour labor). The cost of producing one more unit, the marginal cost, can change with production, and average cost per unit shifts because fixed costs get spread over more units. The key point is that fixed costs do not vary with output, so they stay constant as you produce more.