Shape of Average Fixed Cost Curve is:

The correct option is Rectangular Hyperbola.

To understand why the Average Fixed Cost (AFC) curve takes the shape of a rectangular hyperbola, let us look at the mathematical definition and behavior of average fixed cost.

Average Fixed Cost (AFC) is defined as the total fixed cost (TFC) divided by the quantity of output produced (Q):

$$AFC=\frac{TFC}{Q}$$

By rearranging this formula, we get:

$$AFC\times Q=TFC$$

In the short run, Total Fixed Cost (TFC) remains constant regardless of the level of output produced. Therefore, the product of Average Fixed Cost (AFC) and Quantity (Q) is always equal to a constant value (TFC).

Mathematically, any curve representing the equation $x\times y=\text{constant}$ is a rectangular hyperbola. Under this curve, the area of any rectangle formed by drawing perpendicular lines from any point on the curve to the axes represents the Total Fixed Cost, which remains unchanged.

As the level of output (Q) increases, the Average Fixed Cost (AFC) continuously declines because a constant total cost is being spread over a larger and larger number of units. However, since TFC is a positive constant, AFC will approach zero but will never actually touch either the horizontal axis (output) or the vertical axis (cost). This downward-sloping asymptotic curve is characteristically a rectangular hyperbola.