What is the shape of AFC?

What is the shape of AFC?

Rectangular Hyperbola The average fixed cost (AFC) curve looks like a Rectangular Hyperbola. It happens because same amount of fixed cost is divided by increasing output. As a result, AFC curve slope downwards and is rectangular hyperbola, i.e. area under AFC curve remains same at different points.

What is the shape of AFC curve explain?

Rectangular hyperbola is the shape of the average fixed cost (AFC) curve. The AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes.

What is the shape of AFC as output increases?

Answer: The shape of AFC is downward sloping Rectangular hyperbola. AFC falls as output increases because [Image: TFC=\frac { TFC }{ Output }] and TFC remains Output constant. So, as output increases, TFC remains constant, but AFC falls.

What is AFC with diagram?

Average Fixed Cost (AFC) in a diagram: In the given example, the cost of the product starts to fall with the increase in production. The price of a pen started at the price of ₹10/- and decreased to ₹1/-. The average fixed cost decreases with the rise in the output.

Why is AFC downward sloping?

The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC. At output levels when MC>AVC, the production of an additional unit raises average variable costs. ...

What is the shape of AFC curve Class 11?

Rectangular hyperbola Thus the shape of AFC curve is Rectangular hyperbola.

What is the use of AFC curve?

The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC. Variable returns to scale explains why the other cost curves are U-shaped.

Why does AFC curve never touches the Y axis?

(i) AFC curve never touches the X-axis as TFC can never be zero. ... AC, AVC and MC curves are U-shaped because of Law of Variable Propertions. (iv) The gap between them is TFC, which remains same with rise in output. (v) AC curve lies above the AVC curve because both AVC and AFC at all levels of output.

What is AFC formula?

In economics, average fixed cost (AFC) is the fixed costs of production (FC) divided by the quantity (Q) of output produced.

Which is the shape of the AFC curve?

Rectangular hyperbola is the shape of the average fixed cost (AFC) curve. The AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes. Correct answer is (C), Sloping down towards the right.

Why is the average fixed cost ( AFC ) curve downward sloping?

Correct answer is (C), Sloping down towards the right. The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC.

How to find the slope of the TFC curve?

In Fig. 3.13 (a), we have drawn TFC curve parallel to the output axis. Here the output OQ 1, OQ 2 and OQ 3 have been measured in such a way that OQ 1 = Q 1 Q 2 = Q 2 Q 3. Since AFC = TFC/Q, AFC is given by the slope of a ray from the origin to a point on the TFC curve.

How is the AFC related to output rates?

As you see, the AFC is inversely related to output rates. That means that as output rates rise, AFC falls. Of course, this works in reverse. For real-world example of this, look at newspapers and the Post Office. Both have huge fixed costs to overcome.

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