Which of the following cost curve has the shape of a rectangular hyperbola?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Average Fixed Cost Curve.
The Average Fixed Cost (AFC) Curve is shaped like a rectangular hyperbola. This is because:
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Fixed cost remains constant regardless of the level of output.
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As output increases, AFC = Total Fixed Cost ÷ Output, so AFC decreases continuously, but never becomes zero.
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The curve gets flatter and approaches the horizontal axis without touching it, which gives it the shape of a rectangular hyperbola.
Other options:
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Average Cost Curve: U-shaped
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Marginal Cost Curve: U-shaped
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Variable Cost Curve: S-shaped or upward-sloping