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Question : 1
Total: 7
Distinguish between Factor Cost and Market Price.
Solution:
Market Price (MP) is the price paid by the buyer of a commodity in the market whereas Factor Cost (FC) is the cost paid by the producer to the factor of production for their services rendered in the production of the commodity.
MP = FC + NIT ( IT − Subsidies )
FC = MP − NIT
∵ ( NIT → Net Indirect taxes )
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