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Production and cost — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost3 Marks
Question
What does the average fixed cost curve look like? Why does it look so?
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Answer

AFC curve looks like a rectangular hyperbola vide AFC curve in Fig. 3.7 in Q. 3.15. Since total fixed cost (TFC) remains constant irrespective of level of output, therefore, AFC (= TFC + No. of units produced) decreases with increase in level of output. As a result, AFC curve becomes like a rectangular hyperbola.

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