Read the following statements - Assertion (A) and Reason (R):
Assertion: Factor cost can be greater than Market price sometimes.
Reasoning: It happens when subsidies are more than direct taxes.
From the given alternatives choose the correct one:

Assertion (A) is true but Reason (R) is false.

The correct answer is Option 3: Assertion (A) is true but Reason (R) is false.

Assertion: Factor cost can be greater than Market price sometimes. This is correct. Factor cost refers to the total cost incurred by producers in the production process, including costs such as wages, rent, interest, and profits. Market price, on the other hand, is the price at which goods and services are sold in the market. Factor cost can indeed be greater than market price in some cases, especially when producers receive subsidies or other forms of support that reduce their production costs.

Factor Cost +Net Indirect Taxes = Market Prices.

Net Indirect Taxes is Indirect taxes minus subsidies.

This means Factor Cost is usually smaller than Market Price. In such a case, NIT IS POSITIVE, which means Indirect taxes are greater than subsidies.

For Factor Cost to be greater than Market Price, NIT needs to be negative which means subsidies are greater than indirect taxes.

Reasoning: It happens when subsidies are more than direct taxes. This is incorrect. It happens when subsidies are more than INDIRECT (NOT DIRECT) taxes.