Question

Shape of Average Fixed Cost (AFC) curve is ..........

• A. Constant
• B. ‘U’ Shaped
• C. Rectangular Hyperbola
• D. Reverse Hyperbola

Hint:

AFC falls as output rises because fixed cost is spread over more units. Its graph is always a rectangular hyperbola.

Answer 1

The Correct Option is C

Step 1: Formula of AFC.
\[ AFC = \frac{TFC}{Q} \] where \(TFC\) = Total Fixed Cost, \(Q\) = Output. Step 2: Explanation.
Since TFC is constant, as output increases, AFC decreases continuously but never reaches zero. Its curve forms a rectangular hyperbola to both axes.
Step 3: Eliminate options.
- (A) Constant → wrong, AFC falls.
- (B) U-shaped → applies to AC and AVC, not AFC.
- (C) Correct → rectangular hyperbola.
- (D) Reverse hyperbola → not used in cost curves.
Final Answer: \[ \boxed{\text{Rectangular Hyperbola}} \]