Question Details

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

Options

A

the opportunity cost is zero.

B

the opportunity cost is ignored.

C

the opportunity costs is transferred from the consumers of the product to the tax-paying public.

D

the opportunity cost is transferred from the consumers of the product to the Government.

Show Answer

Correct Answer :

Option C

the opportunity costs is transferred from the consumers of the product to the tax-paying public.

Solution :

The correct option is the opportunity costs is transferred from the consumers of the product to the tax-paying public.


Step-by-step Explanation:


1. Understanding Opportunity Cost:
Opportunity cost refers to the value of the next best alternative foregone when a choice is made. Even if a good or service is provided for free to the end consumer, resources (such as labor, materials, and capital) are still required to produce it. Thus, the opportunity cost is never zero.


2. Government Provision and Financing:
When the Government provides a commodity "free of charge" to the public, consumers do not pay out-of-pocket at the point of consumption. However, the government incurs production or procurement costs, which are financed through public revenue—primarily taxes collected from taxpayers.


3. Transfer of Cost:
Because tax dollars fund the commodity's production instead of direct consumer payments, the real economic cost (and hence the opportunity cost of allocating societal resources to this commodity) is shifted away from individual consumers and onto the tax-paying public.

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