In the short run, the shape of the average fixed cost curve for a typical firm is?

Option 1 -> Incorrect. A vertical line would indicate AFC is undefined or infinite at a specific quantity, which is not the case.

Option 2 -> Partially correct but incomplete. While AFC does slope downward, this description doesn't capture its specific mathematical shape.

Option 3 -> The AFC curve follows the equation AFC = TFC/Q, which is a rectangular hyperbola of the form y = k/x, approaching both axes asymptotically.

Option 4 -> Incorrect. A horizontal line would mean AFC remains constant at all output levels, contradicting the inverse relationship between AFC and quantity.

Hence, Option 3: Rectangular hyperbola -> Average Fixed Cost (AFC) is calculated as Total Fixed Cost divided by Quantity (AFC = TFC/Q). Since TFC remains constant in the short run while Q varies, this creates a rectangular hyperbola. As output increases, AFC continuously decreases but never reaches zero (asymptotic to x-axis). Similarly, as output approaches zero, AFC approaches infinity (asymptotic to y-axis). This unique shape distinguishes it from other cost curves and reflects the spreading of fixed costs over larger output levels. -> correct