If (MP − FC) = −₹120 crore in an economy, which combination can be correct?
Answer and explanation
Correct answer: Indirect taxes ₹90 crore and subsidies ₹210 crore
The governing relationship is MP − FC = net indirect taxes = indirect taxes − subsidies. The required difference is −₹120 crore, so subsidies must exceed indirect taxes by ₹120 crore. In option B, ₹90 − ₹210 = −₹120 crore, exactly matching the condition. Options A, C and D produce +₹120 crore, because their taxes exceed subsidies or subsidies are zero. Hence B is the only valid combination.
Frequently asked questions
What is the correct answer to this question?
Indirect taxes ₹90 crore and subsidies ₹210 crore
Why is this the correct answer?
The governing relationship is MP − FC = net indirect taxes = indirect taxes − subsidies. The required difference is −₹120 crore, so subsidies must exceed indirect taxes by ₹120 crore. In option B, ₹90 − ₹210 = −₹120 crore, exactly matching the condition. Options A, C and D produce +₹120 crore, because their taxes exceed subsidies or subsidies are zero. Hence B is the only valid combination.
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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