Shape of Average Fixed Cost Curve is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rectangular Hyperbola
The Average Fixed Cost (AFC) curve is downward sloping and takes the shape of a rectangular hyperbola because:
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AFC = TFC / Q (Total Fixed Cost divided by Output).
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As output (Q) increases, AFC decreases.
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However, it never becomes zero, since fixed cost is spread over more and more units.
This gives the AFC curve a rectangular hyperbola shape — continuously falling but never touching the x-axis.
