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Have you ever heard someone say, Thats a fixed cost. Theres nothing we can do about that. Well, what is a fixed cost exactly? Its a cost thats going to remain constant regardless of any changes in the activity level. By activity level,were talking about things like the number units that the firm produces. So, if the firm produces 50 units instead of 25, that cost is still going to behave the same. Its still going to be exactly the same. Lets just take a really simple example here, like the cost of a business license. If you want to open a pizzeria and it costs $500 to get a business license, it doesnt matter how many pizzas you make throughout the year. Your units produced doesnt have any affect on what this cost is going to be. That cost is always going to be five hundred dollars. It doesnt matter whether you make a single pizza or if you make a thousand. Lets use a more complicated example. Lets think about a manufacturing plant that manufactures trucks. This plant cos