As output rises, the Average fixed cost (AFC) goes on declining

The AFC curve is therefore an onward sloping curve. (ii) As output approaches Zero, average fixed cost approaches infinity, but AFC curve never touches the Y-axis. On the other hand, as output reaches very high levels, average fixed cost approaches zero, but it never reduces itself to zero, it always remains positive. Hence the AFC curve never touches the X-axis also. Thus it follows that AFC curve never touches either of the axis. Actually this curve takes the shape of rectangular hyperbola, which shows that the area under the curve (i.e., total fixed cost) always remains the same. AFC is illustrated in the following table and diagram.

 

Units of TFC (Rs) AFC (Rs)
1 200
2 200 200
3 200 100
4 200 667
5 200 50
6 200 333

 

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