In cost theory, the usual shape of the ________ curve is a rectangular hyperbola.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. average fixed cost.
In cost theory, the usual shape of the average fixed cost (AFC) curve is a rectangular hyperbola. The average fixed cost curve declines continuously as output increases. This is because fixed costs remain constant regardless of the level of output, and as more units are produced, the fixed cost is spread over a larger number of units, causing AFC to decrease. The rectangular hyperbola shape reflects this inverse relationship between average fixed cost and output.