ECONOMICS

Detailed explanation-1: -The variable cost of production is a constant amount per unit produced. As the volume of production and output increases, variable costs will also increase. Conversely, when fewer products are produced, the variable costs associated with production will consequently decrease.

Detailed explanation-2: -Answer and Explanation: The statement, “Fixed costs vary with the level of production or sales volume.", is false. The statement is false because the total fixed cost remains the same within a relevant range of production. The total fixed cost does not change even with the change in production levels.

Detailed explanation-3: -Variable costs typically change in proportion to changes in volume of activity. If volume of activity doubles, total variable costs also double, while the cost per unit remains the same.

Detailed explanation-4: -A fixed cost is a cost that does not change with production or sales volume. For example, if a company leases office space, the monthly rent is a fixed cost.

Detailed explanation-5: -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. The following two charts depict this relationship between fixed costs and output volume.