gs1medium

If a commodity is provided free to the public by the Government, then

  1. A.The opportunity cost is zero.
  2. B.The opportunity cost is ignored.
  3. C.The opportunity cost is transferred from the consumers of the product to the tax-paying public.
  4. D.The opportunity cost is transferred from the consumers of the product to the Government.
▶ Answer & Explanation

Correct answer: C. The opportunity cost is transferred from the consumers of the product to the tax-paying public.

When a government provides a commodity free of charge, it doesn't mean the resource used to produce it has no cost. The resources (labor, capital, etc.) could have been used for producing other goods or services. This forgone alternative represents the opportunity cost. Since the government finances this provision through taxation, the opportunity cost is borne by the tax-paying public, not directly by the government as an entity or by consumers who receive it 'free'.

Source: UPSC gs1 2018

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