Fixed costs are expenses that stay the same no matter how much you produce. Whether your factory makes 10 units or 10,000 units, these costs do not change. They are the baseline expenses of running a business.
Common examples: rent, insurance premiums, loan payments, salaries of permanent staff, and equipment depreciation. A restaurant pays the same rent whether it serves 50 customers or 500. A software company pays the same server costs whether 100 or 100,000 users log in.
The key insight: fixed costs per unit decrease as production increases. If your factory rent is $10,000/month and you make 1,000 units, the rent cost per unit is $10. Make 10,000 units, and it drops to $1. This is why businesses chase volume — it dilutes fixed costs and improves profitability.