ECONOMICS

Detailed explanation-1: -A decrease in fixed cost decreases total cost and leaves marginal cost unchanged and leaves q* unchanged. Total cost is composed of both total fixed costs and total variable costs. Total variable costs vary with the level of production, while total fixed cost doesn’t vary and remains fixed.

Detailed explanation-2: -Sales and Unit Fixed Costs You just divide the number of units sold by your total fixed costs. This means that fixed cost per unit increases when sales decrease, and when sales increase, your fixed cost per unit will decrease, according to finance website Accounting Coach.

Detailed explanation-3: -Fixed costs do not vary with the production level. Total fixed costs remain the same, within the relevant range. However, the fixed cost per unit decreases as production increases, because the same fixed costs are spread over more units.

Detailed explanation-4: -Variable Cost. A fixed cost is a cost that remains constant; it does not change with the output level of goods and services. It is an operating expense of a business, but it is independent of business activity. An example of fixed cost is a rent payment.