Average Fixed Cost (AFC) is indicated by?

Option 1 -> AFC curve is a rectangular hyperbola as it continuously falls but never touches the axes.

Option 2 -> A straight line parallel to X axis represents a constant value, not a continuously declining AFC.

Option 3 -> A straight line parallel to Y axis represents a vertical line at fixed quantity, not AFC behavior.

Option 4 -> A U-shaped curve represents AVC or ATC which first fall then rise, not AFC which only falls.

Hence, Option 1: A rectangular hyperbola -> Average Fixed Cost (AFC) = Total Fixed Cost (TFC) / Quantity. Since TFC remains constant, as output increases, AFC continuously decreases. This creates a rectangular hyperbola curve that approaches both axes asymptotically but never touches them. The curve follows the mathematical property xy = constant (where x is quantity and y is AFC), which defines a rectangular hyperbola. -> correct