If net indirect taxes are 10 percent of market price and market price is ₹2,000 crore, what is factor cost?
Answer and explanation
Correct answer: ₹1,800 crore
The relationship is market price = factor cost + net indirect taxes. Net indirect taxes are 10% of the market price, so they equal 0.10 × ₹2,000 crore = ₹200 crore. Rearranging, factor cost = market price − net indirect taxes = ₹2,000 − ₹200 = ₹1,800 crore. Option C confuses market price with factor cost, while A and D do not follow the stated 10% deduction.
Frequently asked questions
What is the correct answer to this question?
₹1,800 crore
Why is this the correct answer?
The relationship is market price = factor cost + net indirect taxes. Net indirect taxes are 10% of the market price, so they equal 0.10 × ₹2,000 crore = ₹200 crore. Rearranging, factor cost = market price − net indirect taxes = ₹2,000 − ₹200 = ₹1,800 crore. Option C confuses market price with factor cost, while A and D do not follow the stated 10% deduction.
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.
