Question

Assertion (A):
The average fixed cost curve is a rectangular hyperbola.
Reason (R):
Multiplication of average fixed cost with the quantity of output produced, always yields a fixed value.

• A. Both (A) and (R) are correct and (R) is the correct explanation of (A)
• B. Both (A) and (R) are correct but (R) is not the correct explanation of (A)
• C. (A) is correct but (R) is not correct
• D. (A) is not correct but (R) is correct

Hint:

Logic Tip: Any curve where the product of two variables remains constant forms a rectangular hyperbola.

Answer 1

The Correct Option is A

Step 1:
Average Fixed Cost is: \[ AFC=\frac{TFC}{Q} \] where:
• $TFC$ = Total Fixed Cost
• $Q$ = Quantity of output

Step 2:
\[ AFC \times Q = \frac{TFC}{Q} \times Q \] \[ = TFC \] Since total fixed cost remains constant, the product is always fixed.

Step 3:
Because the product of AFC and output remains constant, the AFC curve takes the shape of a rectangular hyperbola.

Step 4:
Thus, both Assertion and Reason are correct and Reason correctly explains Assertion. \[ \boxed{\text{Option (1)}} \]