Here's the distinction between Fixed costs and Variable costs: Fixed costs are expenses that do not change in the short run, regardless of the level of production. These costs must be paid even if no output is produced. Examples include rent for a factory, insurance premiums, and salaries of administrative staff. Variable costs are expenses that change directly with the level of production. As output increases, variable costs increase, and as output decreases, variable costs decrease. Examples include raw materials, wages for production workers, and electricity used in manufacturing. The key difference is that fixed costs are independent of output in the short run, while variable costs fluctuate with the volume of goods or services produced. That's 2 down. 3 left today — send the next one.