(a) Why is Total Variable Cost curve inverse S-shaped?
(b) What is Average Fixed Cost of a firm ? (b) What is Average Fixed Cost of a firm ? Why is an Average Fixed Cost Curve a rectangular Hyperbola ? Explain with help of a diagram.

Explanation

(a) Total Variable Cost is zero at zero level of output. It initially increases at decreasing rate and late it increases at increasing rate. TVC is an inversely S-shaped curve due to the Law of Variable Proportion.
(b) Average fixed cost refers to the per unit fixed cost of production. Value of Total Fixed Cost (TFC) does not vary at any level of output. When constant TFC is divided by incremental output, the result would be falling AFC. AFC diminishes by the same proportion as that of the proportion of increase of the number of units and the product will always be same and equal to TFC. AFC keeps on falling as the level of output increases, but can never become zero. As a result, AFC curve is a 'rectangular hyperbola'