Final answer:
A computer company must exceed total production costs with sales revenue to make a profit. The price per computer, considering both fixed and marginal costs, determines profitability. Graphs illustrating AC, MC, and AVC curves demonstrate the cost-profit relationship visually.
Step-by-step explanation:
Profit Analysis of Computer Sales
When a computer company sets its pricing structure, it must consider both fixed and variable costs to determine if it can make a profit at a certain sales price. For instance, with fixed costs of $250 and varying marginal costs for the production of each subsequent computer, the company must find a price that exceeds these costs to achieve profit. If computers are sold for $500 each, one must calculate the total costs and compare them with the total revenue to determine profitability.
The cost of using a computer is a mix of operational costs and usage time. By comparing these costs with potential sales prices and volume, the company can determine if it's making a profit or a loss. For example, if the sum of the fixed costs and the total marginal costs for a production run is less than the revenue from sales at $500 per computer, the company makes a profit; otherwise, it incurs a loss.
In analyzing the cost structure, a graph with Average Cost (AC), Marginal Cost (MC), and Average Variable Cost (AVC) curves helps to visually demonstrate the relationship between production volume, costs, and potential profits or losses.