(Last Word) Fixed costs for a firm are analogous to:

A) the dirt that fills up the financial hole.
B) digging a deeper financial hole by producing when prices are too low.
C) the cost of the shovel needed to fill the financial hole.
D) starting out in a hole that represents economic losses if the firm produces nothing.

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Mercedes Hernandez · Accepted Answer

Final Answer : D, Explanation :  Fixed costs are the costs that a firm has to pay regardless of their level of production. These costs represent the initial investment that the firm has to make to be able to produce any output. In other words, if the firm produces nothing, it will still have to pay these costs. This is analogous to starting out in a hole that represents economic losses.

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