If market price and factor cost are equal which statement must be correct?
Answer and explanation
Correct answer: Net indirect taxes are zero
The governing identity is Market Price = Factor Cost + Net Indirect Taxes. If market price and factor cost are equal, subtracting factor cost from both sides gives net indirect taxes = zero. Therefore, option C must be correct. This does not require indirect taxes or subsidies to be individually zero: they may both exist at equal values. Direct taxes are not part of this conversion identity, so option D does not follow.
Frequently asked questions
What is the correct answer to this question?
Net indirect taxes are zero
Why is this the correct answer?
The governing identity is Market Price = Factor Cost + Net Indirect Taxes. If market price and factor cost are equal, subtracting factor cost from both sides gives net indirect taxes = zero. Therefore, option C must be correct. This does not require indirect taxes or subsidies to be individually zero: they may both exist at equal values. Direct taxes are not part of this conversion identity, so option D does not follow.
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.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
