What will be the relationship between market price and factor cost when net indirect taxes are zero?
Answer and explanation
Correct answer: Both will be equal
The governing formula is Market Price = Factor Cost + Net Indirect Taxes. When net indirect taxes equal zero, the formula becomes Market Price = Factor Cost + 0, so both values are equal. Hence option C is correct. Option A would apply with positive net indirect taxes, and option B with negative net indirect taxes; option D has no basis in the formula.
Frequently asked questions
What is the correct answer to this question?
Both will be equal
Why is this the correct answer?
The governing formula is Market Price = Factor Cost + Net Indirect Taxes. When net indirect taxes equal zero, the formula becomes Market Price = Factor Cost + 0, so both values are equal. Hence option C is correct. Option A would apply with positive net indirect taxes, and option B with negative net indirect taxes; option D has no basis in the formula.
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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