rectangular hyperbola means??
Rectangular Hyperbola (also known as equilateral hyperbolas or right hyperbolas) are 'C'-shaped curves. In these curves, the vertical and the horizontal portions (of the curves) get closer to the y-axis and x-axis as we move vertically upwards and horizontally rightwards. But, both the portions of a rectangular hyperbola never ever touch any of the axes of the graph.
AFC is a rectangular hyperbola curve. This is simply because Total Fixed Costs are constant and when output increases, then Average Fixed Costs fall. In other words, with increase in output, per unit cost falls. Algebraically,
In the above equation, the bar over TFC implies that it is constant. From the equation, we can infer that as output (Q) increases, the fraction (TFC/Q) falls, therefore, AFC falls. But, as we know that TFC can never be zero (can you think of cost of production to be zero?-- simply no!!), so AFC will continue to fall and tend to be zero; but won't ever be zero. This implies that AFC will never touch the graph axes; that is why, its shape is like English alphabet 'C'.