Question

Market price and Factor cost will be equal when there is ____________.

• A. No direct tax
• B. No indirect tax
• C. No subsidy
• D. No indirect tax and no subsidy

Answer 1

The correct option is D No indirect tax and no subsidy

Market price and Factor cost will be equal when there is no indirect tax and no subsidy.

Formula: Market price - indirect tax + subsidies = Factor cost

Hence, if there is no indirect tax or subsidies, market price= factor cost.