WBCS.LIVE practice question

What is the graphical shape of a typical average fixed cost (AFC) curve?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. U-shaped
  2. L-shaped
  3. Rectangular hyperbola
  4. Upward sloping

Correct answer and explanation

Correct answer: Rectangular hyperbola

Explanation: āœ… Correct Answer: C) Rectangular hyperbola šŸ“š Explanation: Average Fixed Cost (AFC) is calculated by dividing total fixed costs by the quantity of output produced. Because total fixed costs remain constantly unchanged regardless of production levels, the AFC continuously declines as output increases, but it never touches zero. Graphically, this continuous decline forms a curve known as a rectangular hyperbola in microeconomic theory.