Market price is ₹2,160 crore and it is 108 percent of factor cost. What is factor cost?
Answer and explanation
Correct answer: ₹2,000 crore
The governing percentage principle is that if market price equals 108% of factor cost, then MP = 1.08 × FC. Rearranging gives FC = MP/1.08 = ₹2,160/1.08 = ₹2,000 crore. Hence option B is correct. Multiplying ₹2,160 by 1.08 gives ₹2,332.8 crore, but that would incorrectly increase the already known market price instead of recovering the original factor cost. The other values do not satisfy the stated 108% relationship.
Frequently asked questions
What is the correct answer to this question?
₹2,000 crore
Why is this the correct answer?
The governing percentage principle is that if market price equals 108% of factor cost, then MP = 1.08 × FC. Rearranging gives FC = MP/1.08 = ₹2,160/1.08 = ₹2,000 crore. Hence option B is correct. Multiplying ₹2,160 by 1.08 gives ₹2,332.8 crore, but that would incorrectly increase the already known market price instead of recovering the original factor cost. The other values do not satisfy the stated 108% relationship.
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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