Final answer:
Discounting computer prices by 10% would result in a vertical downward shift of the projected profit graph. The impact on profits, whether a loss or gain, depends on the sale price relative to the average cost, marginal cost, and average variable cost represented on a graph.
Step-by-step explanation:
The question deals with the impact of a price discount on profits and how it transforms a graph showing projected profits. When George decides to discount the computer prices by 10%, this will likely decrease the projected profits assuming all else remains equal. On his graph representing projected profits over the next six months, a vertical downward shift will occur because each unit sold now generates 10% less revenue. To find the new ordered pairs, you would multiply the profit value of each original ordered pair by 90% (as the profit per unit will be 90% of the original figure).
To determine if selling computers at a certain price would result in profit or loss, one would need to know the break-even price, which is the price at which total revenues equal total costs (zero-profit point), as well as the shutdown point, the price at which the company should cease operations rather than continue to produce. For example, if the computers are sold at $500 and the total costs are below this price, the firm makes a profit. Otherwise, it incurs a loss. This can be illustrated on a graph with Average Cost (AC), Marginal Cost (MC), and Average Variable Cost (AVC) curves.
If the firm sells the computers for $300, determining profit or loss and its magnitude would similarly involve comparing the price to the costs represented by the AC, MC, and AVC curves.