Which is the correct example of fixed cost in a business?
Answer and explanation
Correct answer: Monthly shop rent
A fixed cost generally remains unchanged in the short run when the level of production or sales changes, within the relevant capacity. Monthly shop rent is a common example because it is usually payable even when output is low. Raw material, per-sale packing, and production-linked electricity normally vary with activity, so they are variable costs. Therefore A is correct.
Frequently asked questions
What is the correct answer to this question?
Monthly shop rent
Why is this the correct answer?
A fixed cost generally remains unchanged in the short run when the level of production or sales changes, within the relevant capacity. Monthly shop rent is a common example because it is usually payable even when output is low. Raw material, per-sale packing, and production-linked electricity normally vary with activity, so they are variable costs. Therefore A is correct.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
