Aggregates related to national income - Market price and factor cost

Correct answer: C. ₹0

Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. Here, net indirect taxes = ₹200 crore − ₹200 crore = ₹0. Therefore option C is correct. The amounts cancel because the tax and subsidy are equal. Option A counts only the tax, option B incorrectly adds the two amounts, and option D has no basis in the given figures.

Correct answer: C. ₹760

Explanation: First calculate net indirect taxes: indirect tax − subsidy = ₹90 − ₹30 = ₹60. Market price equals factor cost plus net indirect taxes, so market price = ₹700 + ₹60 = ₹760. Therefore option C is correct. Option A subtracts the net tax, B ignores taxes and subsidies, and D adds the gross tax without deducting the subsidy.

Correct answer: B. ₹900

Explanation: First find net indirect taxes: ₹150 − ₹50 = ₹100. Since market price = factor cost + net indirect taxes, factor cost = market price − net indirect taxes. Thus, factor cost = ₹1,000 − ₹100 = ₹900. Option B is correct. Option C ignores the adjustment, A subtracts the gross tax without considering the subsidy, and D increases the market price instead of converting it downward.

Correct answer: A. Consumer

Explanation: An indirect tax is imposed on a producer, seller, or transaction, but its economic burden can generally be shifted forward to consumers through a higher selling price. This is why indirect taxes create a difference between factor cost and market price. Option A is correct. The burden is not necessarily borne only by the government or employees, and option D ignores the possibility of price shifting.

Correct answer: A. Production cost may fall

Explanation: A subsidy is financial assistance provided by the government to a producer or consumer. For a producer, it can reduce the effective cost of inputs or production, making supply more profitable and sometimes allowing a lower selling price. It does not eliminate wages or all taxes, and it does not stop production. Therefore, option A correctly identifies the possible benefit.

Correct answer: B. ₹400 crore

Explanation: The relationship is Market Price = Factor Cost + Net Indirect Taxes. Hence, Net Indirect Taxes = Market Price − Factor Cost = ₹3,900 crore − ₹3,500 crore = ₹400 crore. Option B is correct. ₹300 crore and ₹500 crore do not follow from the stated subtraction, while ₹7,400 crore results from adding the two values rather than finding their difference.

Correct answer: B. Minus ₹300 crore

Explanation: Use the identity Net Indirect Taxes = Market Price − Factor Cost. Thus, ₹4,200 crore − ₹4,500 crore = −₹300 crore. The negative result means subsidies exceed indirect taxes by ₹300 crore; it is not a positive tax amount. Therefore, option B is correct. Option A ignores the negative sign, while C and D use unrelated values or addition.

Correct answer: C. Direct tax is not used

Explanation: The conversion between market price and factor cost uses net indirect taxes, not direct taxes. The formula is Factor Cost = Market Price − Net Indirect Taxes, or Market Price = Factor Cost + Net Indirect Taxes. Direct taxes are related to income payments and are not the adjustment used in this conversion. Therefore, option C is correct; options A and B wrongly apply direct taxes, and D confuses them with depreciation.

Correct answer: B. They will rise

Explanation: Net indirect taxes are calculated as Indirect Taxes − Subsidies. If indirect taxes increase and subsidies do not change, the subtraction produces a higher net amount. Consequently, the gap between market price and factor cost may widen, assuming other conditions remain unchanged. The result is not necessarily zero, and unchanged subsidies do not cancel the increase. Therefore, option B is correct.

Correct answer: B. They will fall

Explanation: Net indirect taxes equal indirect taxes minus subsidies. When the amount of subsidies increases while indirect taxes stay constant, a larger amount is subtracted from the same tax total. Therefore, net indirect taxes decrease. The change is not automatically a doubling or a fall to zero; its exact size depends on the amount of the subsidy increase. Hence, option B is correct.

Correct answer: C. ₹11,300 crore

Explanation: First calculate net indirect taxes: ₹1,000 crore − ₹300 crore = ₹700 crore. To convert output at market price into output at factor cost, subtract net indirect taxes: ₹12,000 crore − ₹700 crore = ₹11,300 crore. Thus, option C is correct. Option A subtracts gross taxes, B uses an incomplete adjustment, and D adds rather than subtracts the net tax.

Correct answer: B. ₹7,150 crore

Explanation: The conversion formula is Factor Cost = Market Price − Net Indirect Taxes. Substituting the given values gives ₹7,600 crore − ₹450 crore = ₹7,150 crore. Therefore, option B is correct. Option D would result from adding the net tax, which converts factor cost into market price rather than the reverse. Option C ignores the tax adjustment, and option A uses an incorrect subtraction.

Correct answer: C. ₹8,850 crore

Explanation: Market price is obtained by adding net indirect taxes to factor cost because Market Price = Factor Cost + Net Indirect Taxes. Therefore, ₹8,300 crore + ₹550 crore = ₹8,850 crore. Option C is correct. Option B merely repeats factor cost, option A subtracts the tax, and option D adds the figures incorrectly. The direction of the adjustment is essential in this conversion.

Correct answer: B. ₹500 crore

Explanation: Net indirect taxes are calculated by subtracting subsidies from indirect taxes: Net Indirect Taxes = Indirect Taxes − Subsidies. Thus, ₹720 crore − ₹220 crore = ₹500 crore. Option B is correct. Option C reports gross indirect taxes without deducting subsidies, while option D adds taxes and subsidies. Option A reflects an incorrect subtraction, so it cannot be selected.

Correct answer: B. Negative ₹250 crore

Explanation: The governing concept is that net indirect taxes equal indirect taxes minus subsidies. Therefore, NIT = ₹650 crore − ₹900 crore = −₹250 crore. The negative sign is essential because subsidies exceed indirect taxes. Option A gives only the absolute difference and misses its direction, while options C and D do not apply the netting formula.

Correct answer: B. ₹5,300 crore

Explanation: The relationship is Market Price = Factor Cost + Net Indirect Taxes. Substituting the values gives MP = ₹5,600 crore + (−₹300 crore) = ₹5,300 crore. A negative net indirect tax reduces market price below factor cost. Option A uses an incorrect subtraction, option C ignores the adjustment, and option D adds ₹300 instead of a negative amount.

Correct answer: C. ₹6,600 crore

Explanation: Use Factor Cost = Market Price − Net Indirect Taxes. Since NIT = −₹200 crore, FC = ₹6,400 − (−₹200) = ₹6,600 crore. Subtracting a negative amount is equivalent to adding ₹200 crore. Option B would be correct only for positive NIT, while A and D do not follow the stated formula.

Correct answer: C. Net indirect taxes are zero

Explanation: The governing identity is Market Price − Factor Cost = Net Indirect Taxes. If market price and factor cost are equal, their difference is zero; hence net indirect taxes must be zero. This does not require indirect taxes or subsidies individually to be zero, because equal amounts of both can offset each other. Direct taxes are unrelated to this conversion.

Correct answer: C. Net indirect taxes

Explanation: The governing identity is Factor Cost = Market Price − Net Indirect Taxes. Net indirect taxes, calculated as indirect taxes minus subsidies, create the difference between the price paid in the market and the remuneration received by factors. Therefore, option C is correct. Depreciation concerns gross and net aggregates, net factor income concerns domestic and national measures, and net exports belong to expenditure accounting.

Correct answer: A. Net indirect taxes are added

Explanation: To convert factor cost into market price, net indirect taxes are added: Market Price = Factor Cost + (Indirect Taxes − Subsidies). Since subsidies are already deducted while calculating net indirect taxes, they are not added separately. Hence option A is correct. Depreciation changes gross and net measures, while net factor income from abroad changes domestic and national measures, not factor cost into market price.

Correct answer: A. It raises market price

Explanation: An indirect tax is included in the price paid by the purchaser, so it generally raises market price relative to factor cost, other things remaining the same. Therefore, option A is correct. An indirect tax does not automatically make price zero, eliminate factor payments, or increase a subsidy. The precise difference is measured through net indirect taxes after subtracting subsidies.

Correct answer: B. It reduces them

Explanation: Net indirect taxes are defined as Indirect Taxes − Subsidies. Consequently, when the subsidy increases while the tax remains unchanged, net indirect taxes decrease by the same amount. Option B is correct. A subsidy does not always make net taxes zero; that happens only when subsidy equals indirect tax. It cannot increase net indirect taxes or leave them unchanged under the stated relationship.

Correct answer: C. Both will be equal

Explanation: Use Market Price − Factor Cost = Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. Here, net indirect taxes = ₹70 crore − ₹70 crore = zero. Therefore, market price equals factor cost, so option C is correct. The equal amounts cancel each other; neither market price nor factor cost is higher, and the relationship is fully determinable.

Correct answer: B. Price paid by the consumer

Explanation: Market price is the amount a buyer pays for a final good or service in the market. In national-income accounting, it reflects factor cost after incorporating net indirect taxes: Market Price = Factor Cost + Indirect Taxes − Subsidies. It is not merely factor income, producer profit, or a government subsidy, so option B is correct.

Correct answer: A. Remuneration paid to factors of production

Explanation: Factor cost is the total remuneration paid to the factors of production for their contribution to producing goods and services. It includes wages to labour, rent to land, interest to capital, and profit to entrepreneurship. Market price differs from factor cost because of indirect taxes and subsidies. Thus, option A is correct; the other choices are expenditure, tax, and trade concepts.