Muft Shiksha™ एक 100% Free Education Portal है 🇮🇳, जिसका उद्देश्य Class 9–12 के हर विद्यार्थी तक High-Quality Education को पूरी तरह मुफ्त पहुँचाना है। 🇮🇳 हम मानते हैं कि अच्छी शिक्षा किसी student की आर्थिक स्थिति पर निर्भर नहीं होनी चाहिए। 🇮🇳 हर विद्यार्थी को वही Quality Study Material, MCQs, Quizzes, Exam Preparation, Concept-Based Learning और Bilingual Support मिलना चाहिए, जो आमतौर पर महंगी Coaching या Premium Platforms में मिलता है। Muft Shiksha™ 🇮🇳 इसी सोच के साथ बनाया गया है
Aggregates related to national income - Market price and factor cost
राष्ट्रीय आय से संबंधित समुच्चय: बाजार मूल्य और साधन लागत
In this Class 12 Economics topic from National Income and Related Aggregates, students learn how national income measures are expressed at market price and factor cost. The topic explains the role of net indirect taxes, including indirect taxes and subsidies, in converting one valuation to the other. Students also connect these concepts with aggregates such as GDP, NDP, GNP and NNP, helping them interpret national income data and apply the relevant relationships in numerical questions.
Practice questions
01 If net indirect taxes change from positive to negative, how will the relationship between market price and factor cost change?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. Market price will be higher first and lower later
Explanation: Using MP − FC = net indirect taxes, a positive value means market price is greater than factor cost. When net indirect taxes become negative, the difference MP − FC is negative, so factor cost becomes greater than market price. Thus the relationship reverses from MP > FC to MP < FC. Option A correctly describes this change.
02 If NDP at market price is ₹13,800 crore and NDP at factor cost is ₹14,100 crore, which statement is correct?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. Net indirect taxes are minus ₹300 crore
Explanation: For the same aggregate measured at two valuation bases, NDP at market price = NDP at factor cost + net indirect taxes. Hence net indirect taxes = ₹13,800 crore − ₹14,100 crore = −₹300 crore. The negative value means subsidies exceed indirect taxes. Option B is correct; depreciation and net factor income are unrelated to this difference.
03 If GNP at market price is ₹16,500 crore and GNP at factor cost is ₹15,600 crore, what is net indirect taxes as a percentage of GNP at market price?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. About 5.45 percent
Explanation: Net indirect taxes equal GNP at market price minus GNP at factor cost: ₹16,500 − ₹15,600 = ₹900 crore. The question asks for this as a percentage of GNP at market price, so percentage = (₹900 ÷ ₹16,500) × 100 = approximately 5.45%. Option B is correct; using factor cost as the denominator would give a different, inappropriate percentage.
05 If market price is 96 percent of factor cost and factor cost is ₹12,500 crore, what will be the net indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. Minus ₹500 crore
Explanation: Calculate market price first: 96% of ₹12,500 crore = 0.96 × ₹12,500 crore = ₹12,000 crore. Net indirect taxes are market price minus factor cost, so NIT = ₹12,000 crore − ₹12,500 crore = −₹500 crore. Option B is correct. The negative value occurs because market price is lower than factor cost, indicating subsidies exceed indirect taxes.
06 If indirect taxes rise by 20 percent and subsidies fall by 20 percent what information is required to find the effect on net indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. Initial amounts of indirect taxes and subsidies
Explanation: Net indirect taxes are calculated as indirect taxes minus subsidies. A percentage change is always applied to its respective initial base, so the original tax and subsidy amounts are essential. If T and S are the initial amounts, the new net indirect tax is 1.20T − 0.80S. Therefore, percentages alone cannot determine the numerical effect, making option A correct; the other choices omit the required base values.
07 Initial indirect taxes were ₹1,000 crore and subsidies were ₹400 crore. Taxes rose by 10 percent and subsidies rose by 25 percent. What will be the new net indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. ₹600 crore
Explanation: The governing relation is net indirect taxes = indirect taxes − subsidies. The new tax is ₹1,000 × 1.10 = ₹1,100 crore, while the new subsidy is ₹400 × 1.25 = ₹500 crore. Hence, new net indirect taxes equal ₹1,100 − ₹500 = ₹600 crore. Option A ignores the separate percentage changes, whereas ₹700 crore is only the original net amount.
08 If net indirect taxes fall from ₹900 crore to ₹500 crore while factor cost remains unchanged how much will market price change?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. It will fall by ₹400 crore
Explanation: The governing identity is market price (MP) = factor cost (FC) + net indirect taxes (NIT). NIT changes from ₹900 crore to ₹500 crore, a decrease of ₹400 crore. Since FC is explicitly unchanged, MP must also decrease by ₹400 crore. Option A reverses the direction, option C uses the final NIT rather than the change, and option D ignores the identity.
09 If market price rises by ₹700 crore and net indirect taxes rise by ₹250 crore what will be the change in factor cost?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. Increase of ₹450 crore
Explanation: From MP = FC + NIT, the change in factor cost is ΔFC = ΔMP − ΔNIT. Substituting the given changes gives ΔFC = ₹700 crore − ₹250 crore = ₹450 crore. Thus factor cost increases by ₹450 crore. Option A reports only the tax change, option C reports only the market-price change, and option D incorrectly adds both changes.
10 If factor cost falls by ₹500 crore and net indirect taxes rise by ₹200 crore what will be the total change in market price?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. Decrease of ₹300 crore
Explanation: Market price equals factor cost plus net indirect taxes: MP = FC + NIT. Represent the fall in FC as −₹500 crore and the rise in NIT as +₹200 crore. Therefore, ΔMP = −500 + 200 = −₹300 crore, meaning market price decreases by ₹300 crore. Option C ignores the offsetting rise in NIT, while B and D give the wrong direction.
11 Why is depreciation not subtracted while converting market price into factor cost?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. Because depreciation is the difference between gross and net aggregates
Explanation: Depreciation is used to convert a gross aggregate into its corresponding net aggregate; it is not a component of the valuation gap between market price and factor cost. That gap is adjusted only through net indirect taxes: Market Price = Factor Cost + Net Indirect Taxes. Therefore, depreciation is not subtracted in this conversion, and option A correctly describes its role. Options B and C confuse it with taxes or subsidies.
12 Why is net factor income from abroad not used in converting market price into factor cost?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. It is the difference between domestic and national aggregates
Explanation: Net factor income from abroad changes the geographical scope of an aggregate: it converts a domestic measure into a national measure, or vice versa. Market price and factor cost, however, are different valuation bases for the same domestic or national aggregate, and their conversion uses net indirect taxes. Hence option A is correct. Depreciation concerns gross versus net, while direct tax is unrelated to this conversion.
13 If GDP at market price is ₹2,400 crore, indirect taxes are ₹320 crore, and subsidies are ₹80 crore, what is GDP at factor cost?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. ₹2,160 crore
Explanation: The governing formula is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹320 − ₹80 = ₹240 crore. Therefore, GDP at factor cost = ₹2,400 − ₹240 = ₹2,160 crore. Option B is correct. ₹2,240 crore would reflect an incorrect adjustment, while the other options do not follow the market-price conversion.
14 If NNP at factor cost is ₹1,850 crore, while indirect taxes are ₹260 crore and subsidies are ₹90 crore, what is NNP at market price?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. ₹2,020 crore
Explanation: To move from factor cost to market price, add net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 260 − 90 = ₹170 crore. Thus, NNP at market price = 1,850 + 170 = ₹2,020 crore. Option C is correct. Subtracting the net tax would move in the opposite direction, and adding the gross tax without deducting subsidies would give an incorrect result.
15 If GDP at market price is ₹2,750 crore and GDP at factor cost is ₹2,590 crore, while subsidies are ₹70 crore, what are the indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. ₹230 crore
Explanation: The market-price minus factor-cost difference gives net indirect taxes: 2,750 − 2,590 = ₹160 crore. Since net indirect taxes = indirect taxes − subsidies, indirect taxes = 160 + 70 = ₹230 crore. Therefore option C is correct. ₹160 crore is only the net indirect tax, while ₹90 crore incorrectly subtracts the subsidy from the net amount and the remaining option does not satisfy the identity.
16 Under which condition will factor cost exceed market price?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. Subsidies exceed indirect taxes
Explanation: The governing relation is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. If subsidies exceed indirect taxes, net indirect taxes become negative. Rearranging gives Factor Cost = Market Price − Net Indirect Taxes, so subtracting a negative amount makes factor cost greater than market price. Therefore, option C is correct; option A would produce the opposite relationship.
17 If GDP at market price is ₹1,800 crore and GDP at factor cost is ₹1,650 crore, then which tax-subsidy combination is possible?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. Indirect taxes ₹200 crore and subsidies ₹50 crore
Explanation: Use GDP at market price = GDP at factor cost + Net Indirect Taxes. Hence, Net Indirect Taxes = ₹1,800 − ₹1,650 = ₹150 crore. For each option, calculate indirect taxes minus subsidies: A gives ₹90 crore, B gives ₹150 crore, C gives zero, and D gives −₹150 crore. Only option B produces the required net indirect tax of ₹150 crore, so it is correct.
18 If net indirect taxes were initially ₹90 crore and indirect taxes fell by ₹25 crore while subsidies rose by ₹15 crore, what will be the new net indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. ₹50 crore
Explanation: Net Indirect Taxes = Indirect Taxes − Subsidies. When indirect taxes fall by ₹25 crore, NIT falls by ₹25 crore. When subsidies rise by ₹15 crore, NIT falls by another ₹15 crore because subsidies are subtracted. Thus the total fall is ₹40 crore, and the new NIT is ₹90 − ₹40 = ₹50 crore. Therefore option A is correct; ₹65 crore considers only the tax fall.
19 If net indirect taxes are negative ₹30 crore and indirect taxes are ₹85 crore, then what are subsidies?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. ₹115 crore
Explanation: The governing formula is Net Indirect Taxes = Indirect Taxes − Subsidies. Let subsidies be S. Given NIT = −₹30 crore and indirect taxes = ₹85 crore, we have −30 = 85 − S. Therefore S = 85 + 30 = ₹115 crore. The negative NIT confirms that subsidies exceed indirect taxes. Option A incorrectly subtracts the negative value, while C satisfies the equation.
21 If national income is ₹2,100 crore and net indirect taxes are negative ₹50 crore, then what is NNP at market price?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. ₹2,050 crore
Explanation: National income is NNP at factor cost. To obtain NNP at market price, add net indirect taxes: NNP at MP = NNP at FC + NIT. Substituting the values gives ₹2,100 + (−₹50) = ₹2,050 crore. A negative NIT reduces market-price valuation because subsidies exceed indirect taxes. Therefore option B is correct; option D wrongly treats the negative tax as a positive addition.
22 If factor cost remains constant and indirect taxes rise by ₹40 crore while subsidies fall by ₹15 crore, then by how much will market price change?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. Increase of ₹55 crore
Explanation: Market price = Factor cost + Net Indirect Taxes, and NIT = indirect taxes − subsidies. A ₹40 crore rise in indirect taxes increases NIT by ₹40 crore. A ₹15 crore fall in subsidies increases NIT by another ₹15 crore because less is subtracted. Thus NIT rises by ₹55 crore. Since factor cost is constant, market price also rises by ₹55 crore. Therefore option C is correct.
23 If (MP − FC) = −₹90 crore in an economy, which combination can be correct?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: B. Indirect taxes ₹60 crore and subsidies ₹150 crore
Explanation: The governing relation is MP − FC = net indirect taxes = indirect taxes − subsidies. The required difference is −₹90 crore. In option B, ₹60 crore − ₹150 crore = −₹90 crore, exactly matching the given value. Option A gives +₹90 crore, option C gives +₹90 crore, and option D gives +₹90 crore. A negative difference means subsidies exceed indirect taxes.
24 If GDP at factor cost is ₹5,000 crore and market price is 8 percent higher than factor cost, what are net indirect taxes?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: A. ₹400 crore
Explanation: The governing identity is GDP at market price = GDP at factor cost + net indirect taxes. Since market price is 8% higher than factor cost, calculate 8% of the given base: 0.08 × ₹5,000 crore = ₹400 crore. Thus net indirect taxes are ₹400 crore. ₹320 crore uses an incorrect percentage, ₹540 crore adds an unrelated amount, and ₹5,400 crore is the resulting market-price GDP rather than the tax difference.
25 Output at market price is ₹4,800 crore and factor cost is 5 percent higher than market price. What is factor cost?
0 reads0 helpful★ – (0)
Answer and explanation
Correct answer: C. ₹5,040 crore
Explanation: The question states that factor cost is 5% higher than market-price output, so the base is ₹4,800 crore. Five percent of ₹4,800 crore is 0.05 × 4,800 = ₹240 crore. Adding this increase gives factor cost = ₹4,800 + ₹240 = ₹5,040 crore. Option B merely repeats the base, while A decreases it and D applies an excessive increase. Therefore, option C is correct.
Google Analytics helps us understand site usage. Google may send limited cookie-free signals before your choice. The Live Visitors widget operates independently of this analytics choice; see the privacy policy for its provider and fallback details. Essential site features work without analytics cookies. You can change your choice later in Privacy choices. Privacy policy
