Economics, 3rd Edition

Fixed and Variable Costs

Luciano’s total cost can be divided into two types. Some costs, called 

fixed costs

, are not determined by the 

amount of output produced; they can change but not as a result of changes in the amount produced. They 

are incurred even if the firm produces nothing at all. Luciano’s fixed costs include any rent he pays because 

this cost is the same regardless of how much lemonade Luciano produces. Similarly, if Luciano needs to 

fixed costs

 costs that are not determined by the quantity of output produced