When MP>FC, Net Indirect Taxes will be ________ .
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(i) Factor cost refers to all factor payments made by the producing unit (firm) to the factors of production for rendering productive services in the production of goods and services. It is called factor cost because it is cost to the producer (firm) who pays to factors in the form of rent, wages, interest, etc. and profit to himself.
(ii) Market price is the price at which a commodity is sold and purchased in the market. It is the price what the buyers pay actually, not what the producers actually get. The point to be noted is that when a product goes to the market for sale, government levies indirect taxes (like sales tax, excise duty, etc.) which is added to the factor cost of the commodity.
Consequently market price becomes higher than factor cost. Similarly, sometimes government gives subsidy on sale of certain goods (like sugar, rice, LPG cylinder) which is subtracted from factor cost. As a result, MP becomes lower than Factor Cost (FC).