The market price of a good is ₹360, with a subsidy of ₹20 and an indirect tax of ₹50. What is its factor cost?
Answer and explanation
Correct answer: ₹330
The governing relation is market price = factor cost + indirect taxes − subsidies. Rearranging gives factor cost = market price − indirect taxes + subsidies. Substitution gives ₹360 − ₹50 + ₹20 = ₹330. Therefore, option B is correct. ₹310 results from subtracting the subsidy as well, ₹360 ignores all adjustments, and ₹390 adds the tax and subsidy in the wrong direction.
Frequently asked questions
What is the correct answer to this question?
₹330
Why is this the correct answer?
The governing relation is market price = factor cost + indirect taxes − subsidies. Rearranging gives factor cost = market price − indirect taxes + subsidies. Substitution gives ₹360 − ₹50 + ₹20 = ₹330. Therefore, option B is correct. ₹310 results from subtracting the subsidy as well, ₹360 ignores all adjustments, and ₹390 adds the tax and subsidy 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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