Final answer:
The term 'overhead' refers to fixed costs in a business setting. An average fixed cost curve for a $1,000 fixed cost would be hyperbolic, indicating that as output increases the cost per unit decreases, embodying the concept of 'spreading the overhead'.
Step-by-step explanation:
When discussing fixed costs in business, the term overhead often comes up. Fixed costs, such as rent, salaries, and equipment, do not vary with the quantity of output produced. When you divide the fixed cost by the quantity of output, you obtain the average fixed cost. If the fixed cost is $1,000, the average fixed cost curve you would graph is hyperbolic, decreasing as the quantity of output increases. This concept forecasts how fixed costs are allocated over a larger quantity of output, thus lowering the cost per unit; this is known as spreading the overhead.
Spreading the overhead means as production rises, the same fixed cost is spread over more units, reducing the average fixed cost per unit. This is crucial for businesses as it shows how increasing production levels can lead to lower unit costs and potentially more competitive pricing.