If market price is ₹2,000 crore and net indirect taxes are ₹200 crore, what will be the factor cost?
Answer and explanation
Correct answer: ₹1,800 crore
The governing relationship is Market Price = Factor Cost + Net Indirect Taxes. Rearranging gives Factor Cost = Market Price − Net Indirect Taxes. Therefore, factor cost = ₹2,000 crore − ₹200 crore = ₹1,800 crore, so option B is correct. Option C repeats the market price, whereas option D adds the tax and option A subtracts too much.
Frequently asked questions
What is the correct answer to this question?
₹1,800 crore
Why is this the correct answer?
The governing relationship is Market Price = Factor Cost + Net Indirect Taxes. Rearranging gives Factor Cost = Market Price − Net Indirect Taxes. Therefore, factor cost = ₹2,000 crore − ₹200 crore = ₹1,800 crore, so option B is correct. Option C repeats the market price, whereas option D adds the tax and option A subtracts too much.
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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