Q.Why is the Average Fixed Cost (AFC) curve continuously downward-sloping and often described as a rectangular hyperbola?

AFC is a constant (TFC) divided by a rising number (output), and dividing a fixed amount by an ever-larger number always gives an ever-smaller result.

Average Fixed Cost is defined as $AFC = TFC / Q$. TFC is, by definition, a fixed amount that does not change as output changes. As output (Q) rises, the same fixed total is being divided among a larger and larger number of units, so the fixed cost attributable to each individual unit keeps shrinking — this is often described as 'spreading the fixed cost' over more output.

Mathematically, since TFC is a constant (say k) and $AFC = k/Q$, this is exactly the equation of a rectangular hyperbola — a curve that falls continuously and approaches, but never touches, either axis. In economic terms this means AFC keeps falling as output rises, but it can never reach zero, because however large output becomes, some fixed cost per unit always remains (it just becomes vanishingly small).

This is also the economic reason firms benefit from producing at larger scale in the short run: spreading a large fixed cost (say, an expensive machine's depreciation) over more units directly lowers the per-unit fixed-cost burden, even before considering anything else.

A frequent error is describing AFC as 'U-shaped' by confusing it with AVC or AC — AFC alone is always a continuously falling curve; it is AVC, AC and MC that are U-shaped.