UPSC Prelims 2018·GS1·economy·basic concepts

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

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  1. Athe opportunity cost is zero.
  2. Bthe opportunity cost is ignored.
  3. Cthe opportunity cost is transferred from the consumers of the product to the tax-paying public.Correct
  4. Dthe opportunity cost is transferred from the consumers of the product to the Government.

Explanation

Opportunity cost is the value of the next best alternative that must be foregone when a choice is made. Even when a commodity is provided free to the public by the Government, resources (labor, capital, raw materials) are still used in its production and distribution. These resources could have been used to produce other goods or services, representing an opportunity cost. This cost does not disappear or become zero. Instead, the burden of this opportunity cost, which would typically be borne by the direct consumers of the product through its price, is transferred to the general tax-paying public, who collectively fund the government's expenditure. The government acts as an intermediary, shifting the financial burden from direct users to taxpayers.

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