For a firm, rent, landscaping, and insurance are examples of ______ costs.

• A. Variable
• B. Fixed
• C. Sunk
• D. Marginal

Answer: (B)

Fixed costs are costs that do not change with the level of production in the short run. Rent is paid the same whether you produce a lot or a little, so it’s fixed. Insurance is another constant payment that doesn’t vary with output, reinforcing the same idea. Landscaping, if it’s a regular maintenance contract for the premises, typically also remains unchanged across different production levels, making it a fixed cost as well. These costs are part of overhead that the firm incurs regardless of activity, unlike variable costs, which rise with production, such as materials or direct labor. Marginal cost refers to the cost of producing one more unit, and sunk costs are past expenditures that cannot be recovered.