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Q58 (CDS-II/2013) Economy › Basic Concepts & National Income › Consumer theory basics Answer Verified

The average fixed cost curve will always be :

Result
Your answer: —  Â·  Correct: A
Explanation

The Average Fixed Cost (AFC) is calculated by dividing the Total Fixed Cost (TFC) by the quantity of output (Q). Since TFC remains constant regardless of the level of production, AFC continuously declines as output increases [2]. Mathematically, the equation AFC = TFC/Q represents a rectangular hyperbola because the product of the two variables (AFC & Q) always equals a constant (TFC). Geometrically, this means the area of any rectangle formed under the AFC curve (representing TFC) remains identical at all points. The curve is downward sloping and convex to the origin, but it never touches either axis because TFC is never zero and Q is always positive. While other short-run cost curves like AVC and SAC are U-shaped due to the law of diminishing returns, the AFC curve uniquely maintains its hyperbolic shape [2].

Sources

  1. [2] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.6.3 Elasticity and Expenditure > p. 32
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