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The difference between the market prices and factor cost is equal to
  • a)
    Indirect taxes paid
  • b)
    Subsidies received
  • c)
    Capital consumption
  • d)
    Indirect tax paid minus subsidies received
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
The difference between the market prices and factor cost is equal toa)...
Basically, ‘factor cost’ is the ‘input cost’ the producer has to incur in the process of producingsomething (such as cost of capital i.e. interest on loans, raw materials, labour, rent, power,etc.). This is also termed as ‘factory price’ or ‘production cost/price’. This is nothing but ‘price’of the commodity from the producer’s side. While the ‘market prices’ is derived after addingthe indirect taxes to the factor cost of the product, it means the cost at which the goods reachthe market i.e. showrooms (these are the Cenvat/central excise and the CST which are paid bythe producers to the Central government in India).
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The difference between the market prices and factor cost is equal toa)Indirect taxes paidb)Subsidies receivedc)Capital consumptiond)Indirect tax paid minus subsidies receivedCorrect answer is option 'D'. Can you explain this answer?
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