Variable cost and fixed cost a. b. C. d. S f. g. a. b. C. T F A variable cost is a cost that varies with the level of production or output. A fixed cost is a cost that does not vary with the level of production or output. Fixed costs are associated with any input whose price is fixed. Variable costs can never increase or decrease. Fixed costs can never increase or decrease. Total fixed costs equal zero when the firm decides to temporarily close down. Fixed costs are irrelevant for operating decisions or deciding how much to produce. d. T F T F T F Production and costs in the long run T F T F TF The long run can be called the planning horizon because: TF The law of diminishing returns applies in the long run. Total variable costs are zero in the long run. TF Total fixed costs are zero in the long run.