Aggregates related to national income - Market price and factor cost

Correct answer: B. Profit received by producer

Explanation: Factor cost measures the payments made to factors of production for their services. Profit is the remuneration of the entrepreneur, one of the factors of production, so option B is correct. Goods and services tax and customs duty are indirect taxes, while a government subsidy is a transfer or adjustment affecting market-price conversion; none of these is a factor payment.

Correct answer: C. ₹55 crore

Explanation: The governing relation is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. Thus, net indirect taxes = 640 − 600 = ₹40 crore. Therefore, indirect taxes = 40 + 15 = ₹55 crore. Option B is only the net amount, while options A and D do not satisfy the formula.

Correct answer: B. ₹35 crore

Explanation: The difference between market price and factor cost is net indirect taxes. Since net indirect taxes = indirect taxes − subsidies, we have 65 = 100 − subsidies. Rearranging gives subsidies = 100 − 65 = ₹35 crore. Option C is the net indirect tax itself, whereas option D incorrectly adds the two figures and option A uses an incorrect subtraction.

Correct answer: B. Negative ₹30 crore

Explanation: Net indirect taxes are calculated as Market Price − Factor Cost. Hence, net indirect taxes = 1,020 − 1,050 = −₹30 crore. The negative sign is economically meaningful: subsidies exceed indirect taxes by ₹30 crore. Option A gives only the absolute difference and loses the sign; options C and D use an incorrect magnitude.

Correct answer: C. ₹750 crore

Explanation: The governing identity is Market Price = Factor Cost + Net Indirect Taxes. Therefore, Factor Cost = Market Price − Net Indirect Taxes = 700 − (−50) = ₹750 crore. A negative net tax means subsidies exceed indirect taxes, so the factor-cost figure is higher than market price. Option A results from mishandling the negative sign.

Correct answer: C. Net indirect taxes

Explanation: National income is defined as NNP at factor cost, whereas the question compares it with NNP at market price. The conversion is NNP at factor cost = NNP at market price − Net Indirect Taxes. Therefore, the difference is caused by net indirect taxes. Depreciation converts gross to net, and net factor income helps derive national from domestic aggregates.

Correct answer: A. They are not imposed directly on the value of output

Explanation: The market-price and factor-cost conversion concerns taxes imposed on the value or sale of output. Indirect taxes affect the price received from the market, while subsidies reduce that price, so only their net amount is used. Direct taxes are levied on income, profits, or property after income is earned; they do not create this output-price adjustment. Hence option A is correct.

Correct answer: B. ₹1,620 crore

Explanation: The governing relation is GDP at factor cost = GDP at market price − net indirect taxes, where net indirect taxes = indirect taxes − subsidies. Thus, net indirect taxes = ₹240 − ₹60 = ₹180 crore. GDP at factor cost = ₹1,800 − ₹180 = ₹1,620 crore, so option B is correct. Option A wrongly subtracts the subsidy, while C and D use an incorrect adjustment.

Correct answer: C. ₹2,720 crore

Explanation: To convert GNP at factor cost into GNP at market price, add net indirect taxes. Net indirect taxes = indirect taxes − subsidies = ₹300 − ₹80 = ₹220 crore. Therefore, GNP at market price = ₹2,500 + ₹220 = ₹2,720 crore, making option C correct. Option D ignores the subsidy, while A subtracts the net tax and B makes no adjustment.

Correct answer: B. ₹330

Explanation: The governing relation is market price = factor cost + indirect taxes − subsidies. Rearranging gives factor cost = market price − indirect taxes + subsidies. Substitution gives ₹360 − ₹50 + ₹20 = ₹330. Therefore, option B is correct. ₹310 results from subtracting the subsidy as well, ₹360 ignores all adjustments, and ₹390 adds the tax and subsidy in the wrong direction.

Correct answer: D. ₹975 crore

Explanation: The governing formula is output at factor cost = output at market price − net indirect taxes. Since net indirect taxes are −₹25 crore, the calculation is ₹950 − (−₹25) = ₹950 + ₹25 = ₹975 crore. Therefore, option D is correct. A negative net indirect tax generally means subsidies exceed indirect taxes, so factor-cost output is higher than market-price output; the other options mishandle the negative sign.

Correct answer: A. ₹865 crore

Explanation: The relationship is output at market price = output at factor cost + net indirect taxes. Substituting the negative value gives ₹880 + (−₹15) = ₹865 crore. Hence, option A is correct. A negative net indirect tax lowers the market-price measure relative to factor cost because subsidies exceed indirect taxes. Option C would incorrectly add the absolute value, while B ignores the adjustment.

Correct answer: A. Increase of ₹15 crore

Explanation: Net indirect taxes are defined as indirect taxes minus subsidies. The change is therefore change in taxes − change in subsidies = ₹20 crore − ₹5 crore = +₹15 crore. Net indirect taxes increase by ₹15 crore, so option A is correct. The ₹25 crore choices incorrectly add both changes or reverse the resulting sign; a subsidy increase reduces net indirect taxes.

Correct answer: B. It will decrease

Explanation: The governing identity is GDP at factor cost = GDP at market price − net indirect taxes. Since GDP at market price is fixed, an increase in net indirect taxes is subtracted from the same constant amount. Therefore, GDP at factor cost decreases, so option B is correct. It cannot remain unchanged because the adjustment term changes, and no information supports a later reversal.

Correct answer: B. It will decrease

Explanation: The governing relation is output at market price = output at factor cost + net indirect taxes. With factor-cost output constant, a decrease in net indirect taxes reduces the amount added to it. Therefore, output at market price decreases, making option B correct. It would increase only if net indirect taxes rose; it would remain unchanged only if the net tax did not change. Nothing implies that output becomes zero.

Correct answer: B. It will decrease

Explanation: The governing relationship is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes equal indirect taxes minus subsidies. If indirect taxes stay unchanged but subsidies increase, net indirect taxes decrease. Therefore, the gap between market price and factor cost becomes smaller, so option B is correct. It need not become zero unless subsidies exactly equal indirect taxes.

Correct answer: A. NDP₍MP₎ = NDP₍FC₎ + NIT

Explanation: The governing conversion is from factor cost to market price: Market Price = Factor Cost + Net Indirect Taxes. Applying this to domestic product gives NDP at market price = NDP at factor cost + NIT. Therefore option A is correct. Option B uses the reverse conversion, option C has the sign reversed, and option D incorrectly changes NDP into GDP.

Correct answer: C. The gross or net nature remains unchanged

Explanation: Converting market price into factor cost only changes the valuation basis. Net indirect taxes are deducted from market price, or equivalently subsidies are added and indirect taxes are deducted. No depreciation adjustment is made, so gross remains gross and net remains net. Domestic or national status also remains unchanged. Therefore option C is correct.

Correct answer: C. The nature remains unchanged

Explanation: The domestic or national character of an aggregate depends on whether net factor income from abroad is included, not on whether the value is measured at market price or factor cost. Market-price-to-factor-cost conversion adjusts only net indirect taxes. Hence a domestic measure remains domestic and a national measure remains national, making option C correct.

Correct answer: B. ₹1,010 crore

Explanation: The governing relationship is Factor Cost = Market Price − Net Indirect Taxes. Therefore, factor cost = ₹1,100 crore − ₹90 crore = ₹1,010 crore. Depreciation is used when converting between gross and net aggregates, not when converting market price into factor cost. Hence option B is correct; options A and D use incorrect deductions or additions, while C simply ignores the tax adjustment.

Correct answer: C. ₹1,420 crore

Explanation: For the same aggregate, Market Price = Factor Cost + Net Indirect Taxes. Thus, market price = ₹1,300 crore + ₹120 crore = ₹1,420 crore. Net factor income from abroad is not required because the question asks for the market-price equivalent of the given aggregate, not a conversion between domestic and national aggregates. Therefore option C is correct.

Correct answer: C. ₹2,040 crore

Explanation: First calculate net indirect taxes: indirect taxes − subsidies = ₹180 crore − ₹220 crore = −₹40 crore. Since subsidies exceed taxes, net indirect taxes are negative. Factor Cost = Market Price − Net Indirect Taxes = ₹2,000 crore − (−₹40 crore) = ₹2,040 crore. Therefore option C is correct; the negative adjustment raises factor cost above market price.

Correct answer: C. ₹1,690 crore

Explanation: The conversion rule is NNP at Market Price = NNP at Factor Cost + Net Indirect Taxes. Net indirect taxes = ₹140 crore − ₹50 crore = ₹90 crore. Hence, NNP at market price = ₹1,600 crore + ₹90 crore = ₹1,690 crore. Option C is correct. Depreciation and foreign income are not involved because NNP and the valuation basis are already specified.

Correct answer: B. Minus ₹300 crore

Explanation: Net Indirect Taxes = Market Price − Factor Cost. Substituting the values gives ₹9,100 crore − ₹9,400 crore = −₹300 crore. The negative result means subsidies exceed indirect taxes by ₹300 crore; it does not mean that the calculation is impossible. Therefore, option B, negative ₹300 crore, is correct.

Correct answer: B. ₹1,160 crore

Explanation: The governing conversion is GDP at Factor Cost = GDP at Market Price − Net Indirect Taxes. Substituting the given values gives ₹1,250 crore − ₹90 crore = ₹1,160 crore. Hence option B is correct. Adding ₹90 crore would move from factor cost to market price, producing ₹1,340 crore, so option D reverses the required direction. The other values do not follow the formula.