The market price of a service is ₹500 and net indirect tax is ₹40. What is its factor cost?
Answer and explanation
Correct answer: ₹460
The governing conversion is Factor Cost = Market Price − Net Indirect Taxes, because market price includes the net tax component in addition to factor payments. Thus, factor cost = ₹500 − ₹40 = ₹460, making option B correct. Option C merely repeats the market price; option D adds the tax instead of subtracting it; and option A subtracts ₹60, not the stated ₹40.
Frequently asked questions
What is the correct answer to this question?
₹460
Why is this the correct answer?
The governing conversion is Factor Cost = Market Price − Net Indirect Taxes, because market price includes the net tax component in addition to factor payments. Thus, factor cost = ₹500 − ₹40 = ₹460, making option B correct. Option C merely repeats the market price; option D adds the tax instead of subtracting it; and option A subtracts ₹60, not the stated ₹40.
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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