Why AFC is a rectangular hyperbola.comment
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Posted by Ansh Mangla 7 years, 10 months ago
- 2 answers
Naveen Sharma 7 years, 10 months ago
Average fixed cost curve looks like a rectangular hyperbola. It is defined as the ratio of TFC to output. We know that TFC remains constant throughout all the output levels and as output increases, with TFC being constant, AFC decreases.
When output level is close to zero, AFC is infinitely large and by contrast when output level is very large, AFC tends to zero but never becomes zero. AFC can never be zero because it is a rectangular hyperbola and it never intersects the x-axis and thereby can never be equal to zero.
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Rajdut Mondal 7 years, 4 months ago
As TFC remains fixed at all level of output, with the rise in output , AFC fall .
Since TFC is never 0 , AFC curve doesn't touch horizontal Axis . Thus the shape of AFC curve is Rectangular hyperbola.
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