Question

Which of the following cost curve is a rectangular hyperbola?

• A. Total Variable Cost (TVC)
• B. Average Variable Cost (AVC)
• C. Total Fixed Cost (TFC)
• D. Average Fixed Cost (AFC)

Hint:

The rectangular hyperbola shape of the TVC curve is a result of the relationship between total variable cost and output, with the product remaining constant.

Answer 1

The Correct Option is A

Step 1: Understanding the concept of a rectangular hyperbola.
A rectangular hyperbola is a type of curve where the product of two variables is constant. In cost theory, the total variable cost (TVC) curve is shaped like a rectangular hyperbola under certain conditions.
Step 2: Explanation of options.

• (A) Total Variable Cost (TVC): Correct. The TVC curve is a rectangular hyperbola, where the total variable cost increases as output increases, and the curve exhibits this characteristic.
• (B) Average Variable Cost (AVC): Incorrect. The AVC curve is U-shaped, not a rectangular hyperbola.
• (C) Total Fixed Cost (TFC): Incorrect. The TFC curve is a horizontal line because total fixed costs do not change with output.
• (D) Average Fixed Cost (AFC): Incorrect. The AFC curve decreases as output increases, but it is not a rectangular hyperbola.

Step 3: Conclusion.
The correct answer is (A) Total Variable Cost (TVC), as it follows the shape of a rectangular hyperbola in cost analysis. Final Answer: Total Variable Cost (TVC).