If market price is ₹2,400 and net indirect taxes are ₹300 what will be factor cost?
Answer and explanation
Correct answer: ₹2,100
The governing identity is Market Price = Factor Cost + Net Indirect Taxes. Rearranging it gives Factor Cost = Market Price − Net Indirect Taxes. Therefore, Factor Cost = ₹2,400 − ₹300 = ₹2,100, so option B is correct. Option C repeats the market price, D incorrectly adds the tax, and A subtracts too much. The subtraction is required because the calculation moves from market price back to factor cost.
Frequently asked questions
What is the correct answer to this question?
₹2,100
Why is this the correct answer?
The governing identity is Market Price = Factor Cost + Net Indirect Taxes. Rearranging it gives Factor Cost = Market Price − Net Indirect Taxes. Therefore, Factor Cost = ₹2,400 − ₹300 = ₹2,100, so option B is correct. Option C repeats the market price, D incorrectly adds the tax, and A subtracts too much. The subtraction is required because the calculation moves from market price back to factor cost.
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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