If output at factor cost is ₹640 crore and the government collects ₹55 crore as indirect taxes while giving subsidies of ₹15 crore, what is the total market price paid by consumers?
Answer and explanation
Correct answer: ₹680 crore
To convert factor cost into market price, add net indirect taxes. Net indirect taxes = indirect taxes − subsidies = ₹55 crore − ₹15 crore = ₹40 crore. Therefore, market price = ₹640 crore + ₹40 crore = ₹680 crore. Option C is correct. ₹710 crore would incorrectly add the subsidy, while ₹640 crore would ignore taxes and subsidies altogether.
Frequently asked questions
What is the correct answer to this question?
₹680 crore
Why is this the correct answer?
To convert factor cost into market price, add net indirect taxes. Net indirect taxes = indirect taxes − subsidies = ₹55 crore − ₹15 crore = ₹40 crore. Therefore, market price = ₹640 crore + ₹40 crore = ₹680 crore. Option C is correct. ₹710 crore would incorrectly add the subsidy, while ₹640 crore would ignore taxes and subsidies altogether.
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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