As the output of a firm moves towards infinity, its average fixed cost (AFC) moves towards:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → zero
AFC is TFC divided by output. TFC stays the same, so as output grows without limit, each unit carries a smaller and smaller share of it. AFC keeps falling towards zero, though it never reaches zero.
NCERT (2026-27): “Shapes of the Short Run Cost Curves … AFC is the ratio of TFC to q. TFC is a constant. Therefore, as q increases, AFC decreases. When output is very close to zero, AFC is arbitrarily large, and as output moves towards infinity, AFC moves towards zero. AFC curve is, in fact, a rectangular hyperbola. If we multiply any value q of output with its corresponding AFC, we always get a constant, namely TFC.”
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