The factor cost of a good is ₹240 with an indirect tax of ₹30 and a subsidy of ₹10. What is its market price?
Answer and explanation
Correct answer: ₹260
The governing relation is Market Price = Factor Cost + Net Indirect Taxes. Net indirect taxes equal indirect tax minus subsidy: ₹30 − ₹10 = ₹20. Therefore, market price = ₹240 + ₹20 = ₹260, so option C is correct. Option B ignores taxation, while ₹280 incorrectly adds the full tax without deducting the subsidy; ₹220 subtracts the net tax in the wrong direction.
Frequently asked questions
What is the correct answer to this question?
₹260
Why is this the correct answer?
The governing relation is Market Price = Factor Cost + Net Indirect Taxes. Net indirect taxes equal indirect tax minus subsidy: ₹30 − ₹10 = ₹20. Therefore, market price = ₹240 + ₹20 = ₹260, so option C is correct. Option B ignores taxation, while ₹280 incorrectly adds the full tax without deducting the subsidy; ₹220 subtracts the net tax in the wrong direction.
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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