Why is the shape of Average Fixed Cost curve a hyperbola ?

1.	Why is the shape of Average Fixed Cost curve a hyperbola ?
Answer» The shape of Average Fixed Cost curve is a hyperbola. This is proved by the following facts : (a) As output increases, AFC goes on decreasing. This is why, AFC curve is a downward sloping curve. (b) The Average Fixed Cost curve slope should go down to touch the horizontal axis. But this will not happen because AFC cannot be zero. Thus, it is clear that the Average Fixed Cost is decreasing due to the increase in production. The Average Fixed Cost curve is a hyperbola. At different points, the total area below the curve will be the same.

Answer»

The shape of Average Fixed Cost curve is a hyperbola. This is proved by the following facts :

(a) As output increases, AFC goes on decreasing. This is why, AFC curve is a downward sloping curve.
(b) The Average Fixed Cost curve slope should go down to touch the horizontal axis. But this will not happen because AFC cannot be zero. Thus, it is clear that the Average Fixed Cost is decreasing due to the increase in production. The Average Fixed Cost curve is a hyperbola. At different points, the total area below the curve will be the same.

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