If indirect taxes are ₹150 crore and subsidies are ₹50 crore, by how much will market price exceed factor cost?
Answer and explanation
Correct answer: ₹100 crore
The difference between market price and factor cost equals net indirect taxes. Calculate net indirect taxes as indirect taxes − subsidies = 150 − 50 = ₹100 crore. Therefore, market price exceeds factor cost by ₹100 crore. Option C ignores the subsidy, while option A reverses the adjustment and option D incorrectly adds taxes and subsidies.
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What is the correct answer to this question?
₹100 crore
Why is this the correct answer?
The difference between market price and factor cost equals net indirect taxes. Calculate net indirect taxes as indirect taxes − subsidies = 150 − 50 = ₹100 crore. Therefore, market price exceeds factor cost by ₹100 crore. Option C ignores the subsidy, while option A reverses the adjustment and option D incorrectly adds taxes and subsidies.
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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