The incorrect section in the sentence is: are setup the factory.
Explanation:
- The phrase "are setup the factory" is incorrect because "setup" is a noun or an adjective, while "set up" is the correct verb form needed here.
- The correct phrase should be: "are setting up the factory" or "have set up the factory," depending on the intended tense.
The corrected sentence should read: "On account of the highland prices, we are setting up the factory on the outskirts of the city."