If factor cost is x and net indirect taxes are 25% of factor cost, while market price is ₹5,000 crore, what is the value of x?
Answer and explanation
Correct answer: ₹4,000 crore
The governing equation is MP = FC + NIT. Since FC = x and NIT = 25% of x, market price = x + 0.25x = 1.25x. Thus, 1.25x = ₹5,000 crore, so x = ₹5,000 ÷ 1.25 = ₹4,000 crore. Option B is correct. A value of ₹3,750 crore would produce a market price of only ₹4,687.5 crore, not ₹5,000 crore.
Frequently asked questions
What is the correct answer to this question?
₹4,000 crore
Why is this the correct answer?
The governing equation is MP = FC + NIT. Since FC = x and NIT = 25% of x, market price = x + 0.25x = 1.25x. Thus, 1.25x = ₹5,000 crore, so x = ₹5,000 ÷ 1.25 = ₹4,000 crore. Option B is correct. A value of ₹3,750 crore would produce a market price of only ₹4,687.5 crore, not ₹5,000 crore.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - Market price and factor cost.
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