Answer to Question #297335 in Microeconomics for Maria

Question

At a turnover of 200 million MU. and a profit rate calculated on turnover of 15%, if the rate of profit becomes 7.5% while maintaining the same turnover, determine how the profit and the cost of production change.

Answer 1

If the turnover is 200 million,

Profit Of 15%$=\frac{15}{100}×200000000=30000000$

Cost$=Turnover-Total Profit=200000000-30000000=170000000$

Profit Of 7.5%$=\frac{7.5}{100}×200000000=15000000$

New cost$=200000000-15000000=185000000$

Therefore the profit change $=30000000-15000000=15000000$

Cost is changing by

$185000000-170000000=15000000$