AFC is a horizontal straight line, said

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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Production and Costs

Question:

AFC is a horizontal straight line, said Mintoo. And TFC is a rectangular hyperbola, said Minku. Who is correct?

Options:

Mintoo

Minku

Both

No one

Correct Answer:

No one

Explanation:

The correct answer is Option 4: No one

AFC is a rectangular hyperbola and TFC is horizontal straight line.

Let's analyze each statement:

AFC (Average Fixed Cost):
- AFC is calculated as TFC/Q (Total Fixed Cost divided by Quantity).
- TFC is a constant value.
- As Q increases, AFC decreases, but it never reaches zero.
- Therefore, AFC is a downward-sloping curve, specifically a rectangular hyperbola, not a horizontal straight line.
TFC (Total Fixed Cost):
- TFC is a constant value, meaning it doesn't change with the level of output.
- Therefore, TFC is represented by a horizontal straight line.