Entrepreneurship and Small Business (ESB) Certification Practice Exam

What type of cost is an internet bill considered?

1. Fixed Cost

2. Variable Cost

3. Mixed Cost

4. Opportunity Cost

The correct answer is: Fixed Cost

An internet bill is considered a fixed cost because it typically remains constant over a set period, such as monthly billing cycles, regardless of the level of business activity. Fixed costs are those that do not fluctuate with production or sales volumes, which means that even if a business does not generate sales in a particular month, the internet bill still needs to be paid. This characteristic allows businesses to plan and allocate resources effectively, as fixed costs provide a level of predictability in financial planning. Conversely, variable costs change in direct proportion to the business activity level. If the internet bill were based on usage, varying monthly depending on data consumption, it could be considered a variable cost. Mixed costs contain elements of both fixed and variable costs, such as a service charge plus additional fees based on usage; however, most standard internet service plans generally classify as fixed. Opportunity costs refer to the potential benefits lost when one alternative is chosen over another, but they do not relate directly to the ongoing operation costs like an internet bill.