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

If a commodity is provided free to the public by the Government, then (UPSC CSE 2018)

1. The opportunity cost is zero.
2. The opportunity cost is ignored.
3. The opportunity cost is transferred from the consumers of the product to the tax-paying public.
4. The opportunity cost is transferred from the consumers of the product to the Government.

Answer: C

Explanation

Option (c) is correct. Opportunity cost refers to the value of the next best alternative forgone when one option is chosen over another.When a commodity or service is provided free by the Government, consumers do not bear its cost directly. However, resources used in providing that service still have alternative uses. The cost of these resources is financed through taxation, which means the burden is shifted from the direct consumers to the tax-paying public. Hence, the opportunity cost is transferred from the consumers of the product to taxpayers.

Topic: Basics of Economy

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