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fixed costsany COSTS that do not vary with the level of output because they are linked to a time base rather than to a level of activity (see Fig. 42). Sometimes called period costs, they include rent and rates and depreciation.
fixed costsany costs that, in the SHORT RUN, do not vary with the level of output of a product. They include such items as rent and depreciation of fixed assets, the total cost of which remains unchanged regardless of changes in the level of activity. Consequently, fixed cost per unit of product will fall as output increases as total fixed costs are spread over a larger output. See Fig. 71 .
In the THEORY OF MARKETS, a firm will leave a product market if in the LONG RUN it cannot earn sufficient TOTAL REVENUE to cover both total fixed costs and total VARIABLE COSTS. However, it will remain in a market in the short run as long as it can generate sufficient total revenue to cover total variable costs and make some CONTRIBUTION towards total fixed costs, even though it is still making a loss, on the assumption that this loss-making situation is merely a temporary one. See MARKET EXIT.