125. A British textile factory in Manchester sources cotton from its colony in India at a significantly lower cost than the market price in Europe. If the factory produces 10,000 units of cloth and sells each unit at \$5 with a production cost of \$3 per unit, how much additional profit does the factory earn due to colonial exploitation if the cost of cotton sourced from India is 30\% lower than the European market price? Assume cotton constitutes 40\% of the total production cost.
Key Concept: Economic Exploitation, Colonial Rivalry
c) \$3,600
[Solution Description]
Step 1: Calculate the total production cost for 10,000 units. Total production cost = Number of units $\times$ Cost per unit = $10,000 \times 3 = \$30,000$.
Step 2: Determine the cost of cotton in the total production cost. Cotton cost = 40\% of \$30,000 = $0.4 \times 30,000 = \$12,000$.
Step 3: Compute the savings due to colonial exploitation. Savings = 30\% of \$12,000 = $0.3 \times 12,000 = \$3,600$.
Step 4: The additional profit earned is equal to the savings, which is \$3,600.
Your Answer is correct.
c) \$3,600
[Solution Description]
Step 1: Calculate the total production cost for 10,000 units. Total production cost = Number of units $\times$ Cost per unit = $10,000 \times 3 = \$30,000$.
Step 2: Determine the cost of cotton in the total production cost. Cotton cost = 40\% of \$30,000 = $0.4 \times 30,000 = \$12,000$.
Step 3: Compute the savings due to colonial exploitation. Savings = 30\% of \$12,000 = $0.3 \times 12,000 = \$3,600$.
Step 4: The additional profit earned is equal to the savings, which is \$3,600.