Which of the following statements are correct?
(A) To arrive at market prices, we add total indirect taxes less total subsidies to the factor cost.
(B) Basic prices include net production taxes.
(C) Basic prices include net product taxes.
(D) To arrive at market prices, we add net product taxes to the basic prices.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B) and (D) only
Factor cost has no taxes, basic prices add net production taxes, and market prices add net product taxes as well.
(A) To arrive at market prices, we add total indirect taxes less total subsidies to the factor cost. — True. Factor cost + indirect taxes less subsidies = market prices.
(B) Basic prices include net production taxes. — True. Basic prices include net production taxes.
(C) Basic prices include net product taxes. — False. Basic prices do not include net product taxes.
(D) To arrive at market prices, we add net product taxes to the basic prices. — True. Basic prices + net product taxes = market prices.
NCERT (2026-27): “2.2.4 Factor Cost, Basic Prices and Market Prices … Factor cost includes only the payment to factors of production, it does not include any tax. In order to arrive at the market prices, we have to add to the factor cost the total indirect taxes less total subsidies. The basic prices lie in between: they include the production taxes (less production subsidies) but not product taxes (less product subsidies). Therefore in order to arrive at market prices we have to add product taxes (less product subsidies) to the basic prices. …” |