Explanation:

Market prices are the prices as paid by the consumers Market prices also include product taxes and subsidies. The term factor cost refers to the prices of products as received by the producers. Thus, factor cost is equal to market prices, minus net indirect taxes.
• Net indirect taxes are calculated by subtracting subsidies from indirect taxes.
• Factor Cost = Market Price-Net Indirect taxes = Market Price - (Indirect taxes-subsidies)
• The market price is greater than factor cost when the net indirect tax is positive, that is, indirect taxes are more than subsidies and market prices are less than the factor cost when the net indirect tax is negative, that is, indirect taxes are less than the subsidies. Hence option (b) is correct.
• An increase or decrease in the cost of production will increase or decrease the factor cost as well as market price in a proportionate amount.