Fixed Costs: Fixed costs are expenses that do not change regardless of the level of production or sales. For example, rent for a store space is a fixed cost because it remains constant even if there are no sales.
Variable Costs: Variable costs are expenses that change based on the level of production or sales. For instance, the cost of ingredients for making lemonade would be considered variable costs since they increase as you make more lemonade.
Shutdown Point: The shutdown point is the minimum price at which a firm will continue to produce in the short run. If prices fall below this point, it becomes more profitable for the firm to shut down operations rather than continue producing at a loss.