IGCSE Economics Practice Test

When production increases, fixed costs remain unchanged because fixed costs are defined as expenses that do not vary with the level of output. These costs include items such as rent, salaries of permanent staff, and depreciation of equipment, which must be paid regardless of how much or how little is produced. Therefore, even if a company produces more goods, these costs remain the same, thus making the choice that fixed costs stay unchanged the correct answer.

In contrast, variable costs, which do fluctuate with production levels, such as raw materials and labor costs depending on output, do change as production increases. This distinction is crucial in understanding the different types of costs associated with production.