The factor cost of a good is ₹400. It has an indirect tax of ₹60 and a subsidy of ₹15. What is its market price?
Answer and explanation
Correct answer: ₹445
The governing relation is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. Thus, net indirect taxes = ₹60 − ₹15 = ₹45. Therefore, market price = ₹400 + ₹45 = ₹445, so option C is correct. ₹400 ignores taxes, ₹355 subtracts the net tax, and ₹475 incorrectly adds the subsidy.
Frequently asked questions
What is the correct answer to this question?
₹445
Why is this the correct answer?
The governing relation is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. Thus, net indirect taxes = ₹60 − ₹15 = ₹45. Therefore, market price = ₹400 + ₹45 = ₹445, so option C is correct. ₹400 ignores taxes, ₹355 subtracts the net tax, and ₹475 incorrectly adds the subsidy.
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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