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Subjects
Class 12EconomicsNational Income and Related AggregatesAggregates related to national income - Market price and factor costMediumLevel 36

If market price exceeds factor cost by ₹75 crore and indirect taxes are ₹120 crore, what are the subsidies?

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Answer and explanation

Correct answer: ₹45 crore

The governing relationship is: Market Price − Factor Cost = Net Indirect Taxes, and Net Indirect Taxes = Indirect Taxes − Subsidies. Therefore, 75 = 120 − Subsidies, so Subsidies = 120 − 75 = ₹45 crore. Option A incorrectly subtracts the wrong quantities, while ₹75 crore is the net indirect tax, not the subsidy. Thus, option B is correct.

Tags

subsidiesindirect taxesnet indirect taxesmarket pricefactor costAggregates related to national income Market price and factor costNational Income and Related AggregatesEconomics

Frequently asked questions

What is the correct answer to this question?

₹45 crore

Why is this the correct answer?

The governing relationship is: Market Price − Factor Cost = Net Indirect Taxes, and Net Indirect Taxes = Indirect Taxes − Subsidies. Therefore, 75 = 120 − Subsidies, so Subsidies = 120 − 75 = ₹45 crore. Option A incorrectly subtracts the wrong quantities, while ₹75 crore is the net indirect tax, not the subsidy. Thus, option B is correct.

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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10 more MCQs
  1. 1What adjustment is made to move from market price to factor cost?
  2. 2Net indirect taxes are equal to what?
  3. 3If indirect tax is 30 and subsidy is 10, what is net indirect tax?
  4. 4If domestic product at factor cost is 500 and net factor income from abroad is 20, what is national income?
  5. 5If domestic product is 400 and net factor income from abroad is −10, what is national income?
  6. 6What is the effect of a subsidy on the relationship between market price and factor cost?
  7. 7If indirect tax is 45 and subsidy is 15, what will be the net indirect tax?
  8. 8If value added at market price is ₹600 and net indirect tax is ₹50, what will be value added at factor cost?
  9. 9What should be done to obtain net value added at factor cost from net value added at market price?
  10. 10If net domestic product at market price is ₹4,600 and net indirect taxes are ₹300, what is net domestic product at factor cost?
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